Net interest margin recovers, wealth income resumes growth, China Merchants Bank's revenue growth turns positive

After two consecutive years of decline, China Merchants Bank’s operating income returned to a growth trajectory in 2025.

The 2025 annual report of China Merchants Bank (600036.SH), disclosed on the evening of March 27, showed that in 2025 the bank’s operating income and net profit attributable to shareholders increased year on year by 0.01% and 1.21%, respectively. Meanwhile, in 2023 and 2024, the bank’s operating income fell by 1.64% and 0.48%, respectively.

Benefiting from growth in investment interest and a narrowing decline in the net interest spread, the bank’s full-year net interest income last year increased 2.04% year on year, with the growth rate improving by more than 3.6 percentage points year on year. In the fourth quarter last year, the bank’s net interest margin also rose by 3 basis points quarter over quarter compared with the third quarter.

And the bank’s wealth management business, which it has vigorously developed this year, after years of pressure, has also started to regain growth. The annual report shows that last year the bank’s net fee and commission income increased 4.39% year on year; its growth rate turned positive for the first time since 2022. For related income in wealth and asset management, they increased 20% and more than 10%, respectively, year on year.

Operating revenue growth turns positive for the first time in three years

According to disclosures in the annual report, last year China Merchants Bank achieved operating income of RMB 178.99B, up 0.01% year on year; total profit of RMB 150.18B, up 0.19% year on year; and net profit attributable to shareholders of RMB 1501.8 billion, up 1.21% year on year.

In the first quarter, first half, first three quarters, and full year last year, the bank’s year-on-year growth in operating revenue was -3.1%, -1.7%, -0.5%, and 0.01%, respectively. This showed a gradually improving trend, turning positive in the fourth quarter.

This was the first time since 2023 that the bank’s full-year operating revenue growth rate turned positive. Previously, in 2023 and 2024, the bank’s operating revenue fell year on year by 1.64% and 0.48%, respectively.

Starting from the second quarter of last year, the bank’s operating revenue growth had gradually improved, with the decline narrowing each quarter. According to the disclosure, in the first quarter last year the bank’s operating revenue decreased 3.1% year on year; in the first half it was down 1.7%, the decline further narrowed to 0.5% in the first three quarters, and it turned into positive growth in the fourth quarter.

The bank’s profit growth showed a similar pattern. In the first quarter last year, the bank’s net profit attributable to shareholders decreased 2.08% year on year; in the first half and first three quarters, they rose by 0.03% and 0.52%, respectively.

The improvement in operating revenue and profit was mainly attributable to a rebound in interest income. For the full year, the bank’s interest income was RMB 91.47B, down 6.12% year on year. Among the main sources of interest income, loan interest income was RMB 135.75B, down 10.37% year on year. However, investment interest income of RMB 107.86B still increased 7.72% year on year.

China Merchants Bank explained that the decline in loan interest income was mainly due to the decrease in the yield on earning assets. Last year, this metric for the bank was 3.04%, down 46 basis points year on year; the net interest spread was 1.78%, down 8 basis points year on year; and the net interest margin was 1.87%, down 11 basis points year on year.

Compared with asset yields, the decline in funding costs was even more pronounced. Last year, the bank’s interest expense was RMB 215.59B, down 16.71% year on year. Deposit interest expense was RMB 11.92B, down 17.55% year on year; both declines were greater than the decline in the interest spread. Under these circumstances, the bank’s net interest income for the full year of RMB 126.21B increased 2.04% year on year, whereas it had decreased 1.58% year on year in the previous year.

The bank expects that this year the net interest margin will still face some pressure to a certain extent, but there are also some positive factors. On the one hand, stock policy factors such as the impact of the LPR rate cut still need to be digested, and there remains room for further policy rate cuts and reserve requirement ratio cuts. Effective asset deployment will continue to face pressure, and the bank expects asset yields to continue the downward trend, with limited room for further decline in funding costs. On the other hand, the ongoing strengthening of the domestic economy’s rebound toward improving conditions will create a stable operating environment for the banking industry. In addition, under regulatory requirements to “counter disorderly competition,” the magnitude of declines in asset pricing is expected to converge.

Starting from the fourth quarter of last year, the bank’s interest spread level rebounded somewhat. According to the annual report, the bank’s net interest margin in the fourth quarter was 1.86%, up 3 basis points quarter over quarter from the third quarter, which was better than the average level among peers.

Wealth management income resumes growth

Driven by growth in wealth and asset management income, after several years of pressure, China Merchants Bank’s fee and commission income also saw a relatively noticeable increase last year.

According to disclosures in the annual report, in 2025 the bank’s net fee and commission income was RMB 46.68B, up 4.39% year on year, with the growth rate turning positive for the first time since 2022. Among them, income related to wealth and asset management reached RMB 267.1 billion and RMB 119.2 billion, respectively, increasing 21.39% and 10.94%, respectively, year on year.

However, affected by the decline in other income, the bank’s non-interest net income fell to some extent last year. Non-interest net income of RMB 46.42B decreased 3.31% year on year. In 2024, this figure was RMB 31.36B, up 1.41% year on year.

Last year, the bank’s other net income was RMB 8.16B, down 13.74% year on year. Among them, other non-interest net income was RMB 6.09B, down 13.63% year on year; net investment gains were RMB 313.6 billion, up 15.11% year on year; and fair value change gains were a floating loss of RMB 81.6 billion, whereas in 2024 they were a floating gain of RMB 170k.

At the same time, the bank’s customer base also grew fairly quickly last year, and this drove business scale growth.

The annual report shows that by the end of last year, the number of the bank’s retail customers increased 6.67% to reach 224 million accounts; the number of corporate customers grew 14.4%, totaling 3.6225 million accounts.

Driven by this, by the end of last year, the bank’s managed retail customer assets under management (AUM) balance exceeded RMB 17 trillion. New additions during the year were over RMB 2 trillion, reaching a historical high. The total financing amount for corporate customers increased 11.08% from the beginning of the year to reach RMB 6.7 trillion.

In the same period, the bank’s total assets reached RMB 13.07 trillion, up 7.56% year on year. Deposit and loan balances were approximately RMB 9.84 trillion and RMB 7.26 trillion, respectively, increasing 5.37% and 8.13% year on year, respectively.

The scale and revenue growth of the bank’s subsidiaries, key branches, and sub-sectors were also important factors behind the industry’s recovery and growth.

By the end of last year, the bank’s eight major subsidiaries had cumulative total assets exceeding RMB 950 billion, up 11.43% from the end of the previous year. Operating income accounted for 12.26% of the total, up 1.97 percentage points year on year. In key regions such as the Yangtze River Delta, the Pearl River Delta, Chengdu-Chongqing region, and the Haixi region, the 16 branches’ growth rates in key indicators such as deposits and loans, customer groups, and AUM were all higher than the average level of domestic branches. In addition, loan growth rates in key areas such as retail wealth, technology, inclusive finance, and manufacturing were also clearly higher than the bank-wide average loan growth rate.

(This article comes from Yicai Finance)