The Bank of China moving towards clarity

In recent years, global geopolitical conflicts and trade frictions have occurred more and more frequently. Domestically, economic development has been accelerating its shift and transformation, interest-rate marketization has been deepening continuously, and the ongoing evolution of financial disintermediation is continuing to advance… The banking industry’s development environment has undergone profound changes. The industry’s challenges are severe and are forcing banks to transform and seek new approaches, as they strive to ride through the cycle.

With the tide going out, the truth is revealed. In its 2025 annual report, China Merchants Bank once again demonstrated its resilience—its “unchanged character” amid cyclical fluctuations—and it also reflects the confidence and determination of this bank, which is about to enter its fourth decade, to embark on a new journey.

A response from a long-termist

At the 2025 mid-year performance briefing, China Merchants Bank’s President Wang Liang had previously expected the bank to achieve steady progress with improvement over time. In 2025, China Merchants Bank’s revenue and net profit growth rates increased quarter by quarter; throughout the year, it delivered positive year-on-year growth. Net fee and commission income increased 4.39% year on year, with the growth rate turning positive for the first time since 2022. Net interest margin was 1.87%, ROAA was 1.19%, ROAE was 13.44%, non-performing loan ratio was 0.94%, and provision coverage ratio was 391.79%. Key indicators continued to remain among the industry’s leaders.

This answer sheet is both a response to the development outlook for China Merchants Bank in 2025 as Wang Liang envisioned it, and also a footnote to its persistence in long-termism amid adversity.

At present, the banking industry faces multiple challenges, such as a low-interest-rate environment, severe risk conditions, and changes in financing demand. According to data disclosed by the People’s Bank of China and the National Financial Regulatory Administration, as of the end of 2025, the amount of renminbi loans extended by China’s financial industry to the real economy has declined year on year for two consecutive years. The interest rates on newly issued corporate loans and individual housing loans have fallen to around 3.1%. Net interest margins for banks have declined to 1.42%, while the average non-performing loan ratio for commercial banks has reached 1.5%.

In a letter to shareholders, JPMorgan Chase Bank CEO Jamie Dimon once wrote: “We are committed to the long term, we manage the cycle, and we are always prepared for the most difficult moments. On the surface, great companies seem wildly different, but the underlying logic that drives their success is often surprisingly similar. In the face of severe challenges, China Merchants Bank is also committed to achieving victory through long-termism.”

By reviewing the content that China Merchants Bank’s Chairman, Miao Jianmin, and President Wang Liang have shared with the market in different settings over the past two years, it becomes clear that words such as “sticking to the law of things, making progress while staying steady,” “steady and sound growth,” “balanced development,” and “capability enhancement” are mentioned repeatedly. This shows that China Merchants Bank not only hopes to be more resilient and more steeled at the strategic level, but also is committed to achieving continuous breakthroughs in capability building—using the “certainty” of capability enhancement to cope with the “uncertainty” of the external environment.

From 2020 to 2025, China Merchants Bank’s operating income grew from RMB 2,904.82 billion to RMB 3,375.32 billion. Net profit grew from RMB 979.59 billion to RMB 1,511.26 billion. Compound growth rates were 3.05% and 9.06%, respectively. Although the bank’s performance has seen some fluctuations over these five years, when the timeline is extended, the five-year compound growth rate still remains among the top ranks among domestic listed large- and medium-sized banks. This confirms what Wang Liang said: “Bank operations are a marathon race; what matters is the determination and endurance to stay steady and move far.”

Notably, in the United Kingdom’s The Banker magazine’s 2025 “Top 1000 World Banks” list, ranked by Tier 1 capital, China Merchants Bank rose from last year’s No. 10 to No. 8. Capital is the portion of a bank’s own funds used to take on risk and absorb losses. It is both the cornerstone of a bank’s sound operations and an important reflection of its overall strength. When China Merchants Bank was founded in 1987, it had capital of only RMB 100 million. After 39 years, its total capital has increased to RMB 1.38 trillion, making it the “youngest” commercial bank among the current world’s Top 10 banks by Tier 1 capital.

Being “the youngest” is what China Merchants Bank relies on its long-term-built competitive advantage. For example, its deposit cost ratio is low. In 2025, current deposits accounted for 50.79%, its average deposit cost ratio was 1.17%, and its net interest margin remained No. 1 among domestic large- and medium-sized banks. In the field of wealth management, China Merchants Bank has built a value circulation chain of “wealth management, asset allocation, specialty asset management, and asset custody,” and it adheres to providing professional asset allocation to customers from a full-market perspective. In 2025, its AUM surpassed RMB 1700 billion, with annual incremental growth exceeding RMB 200 billion, and the number of wealth-holding customers exceeded 64 million. China Merchants Bank has long been known in the industry for strict risk control, with excellent asset quality. In recent years, its non-performing loan ratio has remained stable at below 1%. In 2025, the non-performing ratio was at a relatively favorable level among domestic listed large- and medium-sized banks, and its provision coverage ratio has continued to stay at a high level. China Merchants Bank’s technology capabilities are also impressive. In terms of technology investment intensity, technology foundation, and product/service innovation, it has consistently stayed among the industry’s front ranks. This supports its ability to improve the quality and efficiency of customer service and enhance differentiated competitive strength.

There is no doubt that these strengths are the basis for China Merchants Bank to stick to long-termism amid adversity, and they will also become an important yardstick for testing the effectiveness of its future development.

A voyage of the “four transformations”

Management guru Peter Drucker once said: “No one can control change; the only way is to move ahead of it.” Low interest rates have become the biggest “gray rhino” facing the banking industry today, and no bank can afford to stand aside.

China Merchants Bank was one of the earlier banks in the market to focus on the impact of the low-interest-rate cycle. Last year, it proposed a “four transformations” approach as a way to break through. In Wang Liang’s view, advancing internationalization, integrated operations, differentiation, and smart and digital transformation would enable China Merchants Bank to better diversify its revenue sources, stabilize its business operations, ride through the low-interest-rate cycle, and enhance competitiveness. At the same time, it would provide shareholders with stable and sustainable returns.

China Merchants Bank regards internationalization as an important direction to extend the customer service reach and broaden revenue sources. In recent years, the trend of Chinese companies going global and residents allocating wealth globally has become increasingly obvious, and the demand for financial services from Chinese institutions has become even more urgent. A research report by CICC suggests that successful international expansion means that Chinese institutions can maintain or expand their high-quality customer groups and improve risk pricing and service capabilities; these will be reflected in the income statement. China Merchants Bank’s layout of international institutions and its cross-border service system rank just after a few state-owned large banks, giving it certain advantages in international development. However, it must also handle the many challenges brought by a complex and ever-changing international environment. Miao Jianmin proposed that China Merchants Bank should, while keeping a secure safety bottom line, accelerate the high-quality development of overseas institutions in light of local conditions. It should also, around the “going global” strategy and residents’ cross-border asset allocation, accelerate the building of a globally integrated service capability system. In 2025, the total assets of China Merchants Bank’s overseas institutions grew by 12.88%, and operating income rose by 33.80% year on year—both higher than the bank’s overall asset and revenue growth rates. Key cross-border businesses, such as corporate cross-border receipts and payments and financial market transactions with clients, grew 12.96% and 20.20% year on year, respectively. The development momentum is strong. These figures draw the trajectory of China Merchants Bank’s international development, which is now accelerating its expansion.

Integrated operations are an important move by China Merchants Bank to adapt to changes in customer needs and enhance the resilience of its business development. Based on experience from the international financial industry, low-interest-rate cycles are often also periods when capital markets accelerate development, direct financing continues to deepen, and customers’ demand for integrated financial services keeps surging. Through integrated operations, banks can strengthen comprehensive service capabilities, increase the share of non-interest income, and achieve more diversified revenue. For example, after the Federal Reserve launched the rate-cut cycle in 2019, JPMorgan’s retail banking and commercial banking segments that rely mainly on net interest income saw revenue decline, but its investment banking, wealth management, and asset management segments that rely mainly on non-interest income saw revenue grow against the trend. China Merchants Bank’s integrated operation layout has been in place for a long time, and it is one of the domestic banking groups with relatively complete financial licenses. In 2025, China Merchants Bank also obtained the Financial Asset Investment Company (AIC) license. Currently, as China Merchants Bank pushes forward integrated transformation, it focuses mainly on leveraging the advantages of multiple financial licenses—strengthening coordination between the head office and branches and between subsidiaries; promoting each subsidiary to improve core capabilities and comprehensive service levels; and increasing business contributions. In 2025, the combined total assets of China Merchants Bank’s eight major subsidiaries grew 11.43% compared with the beginning of the year. Their share of operating income was 12.26%, up 1.97 percentage points from the previous year. Integrated operations are becoming a new growth engine for China Merchants Bank.

From retail-first to technology leadership; from thoughtful service to large wealth management and an integrated service model for retail and commercial banking—China Merchants Bank’s differentiated labels have long been clear. This is also an important source of its core competitiveness. In a low-interest-rate environment, banks face higher requirements for differentiated development. If banks simply compete on price, size, and homogenized competition, it not only disrupts market price signals but also accumulates financial risks—and it is unsustainable. The U.S. banking industry has gone through repeated tests of low-interest-rate cycles, and its leading institutions are also typical representatives of differentiated development. For example, Wells Fargo is strong in retail and small business services; Citibank leads in international operations; and JPMorgan is known as a “universal bank.” China Merchants Bank’s differentiated development path focuses on two areas: business and regions. In terms of business, its retail system advantages are evident. China Merchants Bank aims to leverage its retail strengths to drive balanced and coordinated development across its four major business segments, building new competitive advantages in more niche areas. In 2025, China Merchants Bank’s market competitiveness was further strengthened in various sub-segments such as large wealth management, credit cards, technology finance, green finance, inclusive finance, investment banking, financial markets, and bills—for instance, its daily average balance of corporate wealth management products grew over 31% year on year, and its bill direct discounting business scale ranked second across the whole market. In terms of regions, China Merchants Bank is committed to encouraging key regional institutions such as those in the Yangtze River Delta and the Pearl River Delta to actively tap local development potential and accelerate growth. In 2025, major indicators for its branches in key regions—including customer base, AUM, core deposits, and corporate loans—achieved higher growth rates across the board.

Over the long term, smart and digital transformation is not only an important driving force for China Merchants Bank to smoothly ride through the low-interest-rate cycle, but may also be its key trump card for winning in the future. Among the 4,400 commercial banks in the United States, 54% have already deployed large models, and JPMorgan Chase is accelerating efforts to build the world’s first “all-AI driven” large bank. Miao Jianmin said that in the future, China Merchants Bank should focus on forming AI-based systematic competitive advantages—fully promoting the upgrade of AI from tools to service core functions, and accelerating the building of an intelligent bank. Wang Liang has also put forward the “AIFirst” concept within China Merchants Bank, hoping to achieve “priority,” “leadership,” and “first mover” in AI investment and application, and to fully accelerate the building of smart and digital capabilities. In 2025, China Merchants Bank’s average daily Tokens throughput grew 10.1 times compared with 2024, with 183 specialized models deployed in areas of implementation. It also deployed 856 AI application scenarios in areas such as retail finance, wholesale finance, risk management, and operational offices, saving 15.56 million staff hours. However, to seize the commanding heights of intelligent transformation, and to turn AI from an auxiliary tool into a service core and a core capability, China Merchants Bank still needs to accelerate its pace.

Building the China Merchants Bank model for the new era

A bank’s products, services, strategies, and processes are easy for peers to learn and imitate. But the operating model that is embedded in the organization, team, culture, and mechanisms is usually a systematic capability—deeply underpinning a bank’s core competitiveness.

In the annual report address, Wang Liang said it would build the China Merchants Bank model for the new era, including deepening reforms of the modern enterprise system; improving modern corporate governance mechanisms and market-based incentive-and-constraint mechanisms; creating a high-quality development model of “strict management and upholding the right principles while innovating”; a business model of balanced and coordinated development across four major business segments; and an operations and service model of “people + smart and digitalization.”

China Merchants Bank is a product of reform and innovation. From its early days, it established a sound corporate governance system and market-based mechanisms, such as implementing the “President responsibility system under the leadership of the board of directors” and an incentive-and-constraint mechanism with the “six capabilities mechanism” as its core. In the early 1990s, when the media were exploring the “password” behind China Merchants Bank’s rapid growth just after its birth, it summarized these innovations in institutional mechanisms as the “China Merchants Bank model.”

Today, as China Merchants Bank prepares to enter its fourth decade, it hopes to inject the China Merchants Bank model with new era meaning and construct a new “password” that covers the corporate governance system, incentive-and-constraint mechanisms, development model, business model, and operations and service models.

It is worth noting that China Merchants Bank has already conducted in-depth exploration in areas such as “strict management and upholding the right principles while innovating,” balanced development across the four business segments, and “people + smart and digitalization.”

In recent years, China Merchants Bank has proposed building a management system of “regulated, precise, empowering, systematic, and scientific,” and improving management across all aspects such as risk, assets and liabilities, total cost, operations, and service quality. In 2025, its non-performing loan ratio and cost-to-income ratio were both down by 0.13 and 1.32 percentage points, respectively, compared with 2020. In terms of innovation, China Merchants Bank has proposed driving full-dimensional innovation in products, services, business, and models through technological innovation, and accelerating exploration of “AI + finance.” For example, its domestic trade financing “Lightning Series” products can clearly improve the efficiency of processing companies’ short-term financing. In 2025, the volume of China Merchants Bank’s domestic trade financing business reached RMB 1.64 trillion, up 9.56% year on year.

On balanced and coordinated development across the four business segments, in 2025 China Merchants Bank’s number of retail customers served exceeded 220 million, and the number of corporate customers exceeded 3.6 million. Compared with the end of the previous year, these increased 6.67% and 14.40%, respectively. The contribution of retail financial business continued to remain above 50%. Meanwhile, the bank’s competitive capabilities in corporate finance and its professional advantages in the wealth management and investment segment were further strengthened. Its assets under management and asset custody scales were RMB 471 billion and RMB 26.09 trillion, respectively, keeping it among the top tier in the domestic banking industry.

In terms of “people + smart and digitalization,” China Merchants Bank’s online channels such as its two major apps have advantages such as high customer activity and rich product functionalities, serving as the channel foundation for conducting integrated online-and-offline service. At the same time, China Merchants Bank continues to upgrade intelligent services to improve the quality and efficiency of operations management and customer service.

In the annual report address, Wang Liang wrote: “At 40, we are clearer and more composed, and we move forward with greater determination.” With outstanding operating performance, a long-termist answer sheet, and persistent accumulation of competitive advantages, as China Merchants Bank moves into its fourth decade and heads for a new journey, it will be even more clear-minded and composed. Meanwhile, with its transformation and reforms, steadfast forward progress, and its ability to ride through the cycle, China Merchants Bank will surely carry more of the market’s expectations.

(CIS)

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