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

Kraken News, March 23 (Reporter Yan Qinwen) Narrowing interest spreads and retail risk pressures… How are banks responding to industry-wide challenges? On March 23, CITIC Bank (601998.SH), which for the first time surpassed a total asset size of 10 trillion yuan, held its 2025 annual performance briefing, where management provided detailed responses to market concerns.

According to the previous (March 20) 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. Chairman Fang Heying stated in the annual report speech, “Asset quality is the foundation of a bank’s survival. We have never pursued being the fastest in good times, but rather the most stable in adverse conditions.”

Amid the industry facing “headwinds” and widespread performance pressure, how did CITIC Bank perform? The annual report shows that in 2025, the bank achieved operating income of 212.475 billion yuan, a 0.55% decrease 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 figures, CITIC Bank’s dividend distribution was 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 23, CITIC Bank A-shares closed at 7.88 yuan per share, down 1.13%.

Interest Spread Narrowed by 1.4 Percentage Points, Establishing a “Wide Buffer Zone”

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 deposits maturing in three years or more 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 is still insufficient, affecting the interest spread by 0.3 basis points.”

Furthermore, Fang Heying mentioned that due to demand and strategic factors, the high-yield personal credit loans, such as “Xinsedai,” saw significant reductions last year, 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 still present, although efforts to reduce them began at the end of the quarter, and the impact remains.

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

To address the industry-wide pressure of narrowing interest spreads, CITIC Bank stated in its annual report that it adheres to a “balance of volume and price” management strategy. Fang Heying also highlighted this operational advantage at the performance briefing, referring to it as building a “wide buffer zone” against interest spread shocks, while emphasizing that it is not a “moat.”

Fang Heying pointed out that, in terms of deposit structure, CITIC Bank’s 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 just 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.

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

However, Jin Xinian also mentioned that mortgage-backed business loans and credit cards are still stabilizing. “This is our challenge and also the key to further improving asset quality management. Overall, our risk is under control compared to industry peers,” 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 clearing 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 totaling 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 stated.