Build a "Wide Buffer Zone," China CITIC Bank Explains How to Address Common Industry Pressures at Earnings Call

Ask AI · How does CITIC Bank’s宽缓冲带 strategy respond to narrowing interest spreads?

Blue Whale News, March 23rd (Reporter Yan Qinwen) Narrowing interest spreads and pressure on retail risk… How do banks respond to industry-wide challenges? On March 23rd, CITIC Bank (601998.SH), which has achieved total assets exceeding 10 trillion yuan for the first time, held its 2025 annual performance briefing, where management provided detailed responses to market concerns.

According to the previously released (March 20th) annual report, by the end of 2025, CITIC Bank’s total assets reached 10.13 trillion yuan, a 6.28% increase from the end of 2024. In terms of asset quality, the non-performing loan ratio was 1.15%, down 0.01 percentage points from the end of the previous year; the loan loss coverage ratio was 203.61%, down 5.82 percentage points from the end of last year.

This marks the seventh consecutive year of decline in CITIC Bank’s non-performing loan ratio. In his annual report speech, Chairman Fang Heying stated, “Asset quality is the foundation of a bank’s survival. We have never pursued being the fastest in favorable conditions, but rather the most stable in adverse conditions.”

In the context of industry headwinds and widespread performance pressure, how has CITIC Bank performed? The annual report shows that in 2025, the bank achieved operating income of 212.475 billion yuan, a slight decrease of 0.55% year-over-year; net profit attributable to shareholders was 70.618 billion yuan, up 2.98%. Among these, net interest income was 144.469 billion yuan, down 1.51%; non-interest net income was 68.006 billion yuan, up 1.55%.

Based on these operational data, CITIC Bank’s dividend distribution is quite generous. It is reported that in 2025, the bank plans to increase cash dividends to 21.2 billion yuan, accounting for 31.75% of net profit attributable to common shareholders, both the highest in history.

As of the close on March 23rd, CITIC Bank A-shares closed at 7.88 yuan per share, down 1.13%.

Interest spread narrowed by 1.4 percentage points, establishing a “宽缓冲带”

The banking industry still faces the challenge of narrowing interest spreads, and CITIC Bank is no exception. The annual report shows that in 2025, the bank’s net interest margin was 1.63%, a decrease of 0.14 percentage points from the previous year.

“Compared to industry peers, CITIC Bank’s interest spread has narrowed by 2-3 basis points more,” Fang Heying admitted at the performance briefing.

Regarding the factors influencing the decline in interest spread, Fang Heying pointed out that CITIC Bank had early control over liability costs. In 2024, structural deposits decreased by 60 billion yuan more than industry peers, and this change in pace released impacts early, affecting the interest spread in 2025.

Second, due to efforts to control liability costs, CITIC Bank’s three-year and longer-term deposits were 40 billion yuan less than industry peers last year, impacting the cost of corporate liabilities by 2 basis points.

Additionally, last August, CITIC Bank’s 40 billion yuan Tier 2 capital bonds matured, but early issuance in May led to an extra interest expense of 200 million yuan. “Refined management was not sufficient, which affected the interest spread by 0.3 basis points.”

Furthermore, Fang Heying mentioned that due to demand and strategic factors, last year’s high-yield personal credit loans, such as “Xinsedai,” saw significant reductions, impacting the interest spread by 1.6 basis points. He also noted that in the first quarter of last year, a high proportion of low-yield bills was present, and although efforts to reduce them began at the end of the quarter, the impact was already there.

“If we exclude these factors, last year’s interest spread still outperformed industry peers,” Fang Heying said.

To address the pressure of industry-wide interest spread narrowing, CITIC Bank stated in its annual report that it adheres to a “quantity-price balance” management strategy. Fang Heying also highlighted this operational approach at the performance briefing, referring to it as building a “宽缓冲带” to resist interest spread shocks, while emphasizing that it is not a “moat.”

Fang Heying pointed out that, in a detailed view, CITIC Bank’s deposit structure is relatively reasonable. Corporate demand deposits account for 46%, ranking among the top two among joint-stock banks. Since strengthening self-discipline mechanisms for deposits, the proportion of demand deposits has increased significantly, with interest rates dropping from nearly 2% to a few tenths of a percent; retail demand deposits, although lower than corporate, have also increased by 3.2 percentage points over the past two years.

In Fang Heying’s view, this reasonable structure gives CITIC Bank a clear advantage in funding costs. He revealed that compared to major banks like ICBC, Agricultural Bank, Bank of China, China Construction Bank, and Bank of Communications, CITIC Bank’s liability cost rate differs by only 1 basis point. “This indicates that our cost advantage has entered the first tier,” Fang Heying said.

Over 70% of write-off resources last year used to resolve retail non-performing loans

Beyond the narrowing interest spread, another industry pressure faced by banks is retail risk.

The annual report shows that by the end of 2025, CITIC Bank’s non-performing rate for personal loans (excluding credit cards) was 1.03%, up 0.08 percentage points from the end of last year. The non-performing rate for consumer loans (excluding credit cards) was 2.80%, up 0.66 percentage points; credit card non-performing rate was 2.62%, up 0.12 percentage points.

When discussing the common industry issue of retail pressure, Vice President and Risk Director Jin Xinian provided detailed insights. Regarding consumer loans, last year’s rise in non-performing loans was influenced by the cleanup of tail-end customers and active restructuring by CITIC Bank, leading to a decline in loan scales for auto loans and “Xinsedai.” Currently, the non-performing generation rate has decreased.

Jin Xinian also mentioned that mortgage-backed business loans and credit cards are still stabilizing. “This is our challenge and the key to future asset quality management. Overall, our risk is under control,” he said.

According to Jin Xinian, on the management side, CITIC Bank strictly controls access, manages behavior, strengthens independent risk control capabilities, deepens joint prevention and control mechanisms between business and risk, enhances digital risk management, and accelerates the iteration and upgrading of risk strategies.

On the disposal side, the bank has prioritized resources—over 70% of last year’s write-off resources were used to resolve retail non-performing loans; it has also strengthened collection teams, expanded disposal methods, increased coordination with CITIC Group for risk resolution, and accelerated the cleanup of existing risks.

The annual report shows that during the reporting period, CITIC Bank utilized a combination of collection, transfer, write-off, and restructuring to dispose of non-performing loans amounting to 87.79 billion yuan.

“Looking ahead, with the implementation of policies to stabilize growth and promote consumption, along with improvements in residents’ income and balance sheet repair, and continuous enhancement of our retail credit risk management capabilities, we believe retail asset quality will gradually stabilize,” Jin Xinian concluded.