"Three consecutive championships" face a new situation: multiple contenders enter the battle for county-level competition points

Ask AI · How can Agricultural Bank’s county-level business achieve high growth with low risk?

With the full release of the annual reports for 2025 from the six state-owned major banks, the strengths and weaknesses in vying for key performance indicators have been made clear. In a headwind environment where net interest margins are generally narrowing, all six banks have held the “double growth” bottom line for revenue and net profit, and among them five banks have achieved a “five-in-a-row” decline in their non-performing loan ratios.

Agricultural Bank of China (hereinafter “ABC”) has an especially striking posture of expanding counter-cyclically: starting in 2022, its year-on-year growth rate in total assets ranked first among the six major banks. By the third quarter of 2023, its asset size had surpassed China Construction Bank (hereinafter “CCB”) to become the industry’s second-largest player. By the end of 2025, ABC’s “scale” exceeded CCB by more than RMB 3 trillion, roughly equivalent to being one tier ahead—about one Zhejiang Commercial Bank in between.

Does ABC’s profitability keep pace with its “scale expansion”? In 2025, ABC’s year-on-year growth rate of net profit achieved a “three consecutive years” crown, but the absolute amount of net profit was still RMB 47.9 billion behind the “runner-up,” CCB. CCB remains in the second position in the industry with net profit of over RMB 330 billion, and it is one of only two members of the “RMB 300 billion club,” the other being Industrial and Commercial Bank of China (hereinafter “ICBC”), the “Universe Bank.”

Total assets and net profit at ABC have both grown rapidly year-on-year in a headwind. What is the reason? When peer banks have put county-level finance on the table as a new arena, ABC “started early and dug deep,” and county-level markets have become its home ground. County-level finance used to be synonymous with high risk—can ABC’s asset quality stand up to the test? So far, ABC’s non-performing loan ratio has achieved a “five-in-a-row” decline.

But at the 2025 performance briefing conferences held by each of the six major banks, ICBC, CCB—and especially other state-owned major banks such as Postal Savings Bank (the “most deeply downscaled” bank)—have all claimed they will treat county-level areas as an important battleground. ABC’s advantages in county-level markets are facing a newly competitive landscape.

County-level contribution: close to 60%

ABC’s rise in its ranking by size began in 2023.

In that year’s third quarter-end, the ranking of total assets among the four major banks shifted from “ICBC-CCB-ABC-BOC” to “ICBC-ABC-CCB-BOC.” ABC first surpassed CCB for the first time and has since maintained the second position. The outperformance in net profit growth almost coincided. In 2023, ABC’s year-on-year net profit growth rate even moved to the top among the six major banks for the first time; afterward, it achieved a “three-in-a-row” crown. ABC President Wang Zhiheng, at a performance briefing on March 31, 2026, expressed pride: “ABC’s net profit growth rate has led comparable peers for 6 consecutive years.”

What supports ABC’s “three-in-a-row” crown in net profit growth rate year-on-year? Among the six major banks, ABC’s net interest margin has no advantage—it is only slightly higher than Bank of China (hereinafter “BOC”) and Bank of Communications (hereinafter “BOCOM”). The answer lies in its asset-liability structure: the net interest spread between deposits and loans in county-level areas reaches 2%, far above the bank-wide average of 1.42%.

In other words, what ABC does in the county market is a “low input, low output” business—its liability costs are low, its asset returns are steady. Although the absolute value of the interest spread is not very high, its resilience, sustainability, and capacity for scale expansion become scarce advantages in a period of falling interest rates.

Data confirm this: in 2025, ABC’s county-level business generated pre-tax profit of RMB 188.3 billion, accounting for more than 58% of the bank’s total pre-tax profit; county-level deposits accounted for more than 40% of total deposits; and county-level loans rose to 41% of domestic loans.

From the historical trajectory, this increase in the proportion was not achieved overnight. Between 2021 and 2025, ABC’s year-on-year growth rate of county-level loans consistently exceeded the bank-wide loan growth by 2 to 5 percentage points, with incremental contribution of more than 50%. Against the backdrop of a weakening dividend from urbanization and the advancement of the Rural Revitalization policy, ABC achieved “an increase in county-level business share.”

However, the profit gap of RMB 47.9 billion still remains between CCB and ABC. As CCB moves to expand in the county-level market, whether this gap can continue to narrow still faces many dynamic variables.

Big banks moving into county-level areas

As a matter of fact, county-level finance, inclusive finance, and rural revitalization have become structural incremental targets for the banking industry.

In its 2025 performance communiqué, CCB explicitly stated that “county-level deposit and loan growth rates are higher than the industry average.” For CCB, which is strong in infrastructure and corporate business, this represents a landmark strategic shift. ICBC, more directly, stated in its annual report that it is “accelerating the extension of its expertise in urban finance into county-level markets,” and will form a new digital inclusive finance model around county-level areas. As for Postal Savings Bank’s president Lu Wei, he said plainly at the performance briefing: over 70% of its outlets are located in county-level and rural areas; it is the only state-owned major bank with deep coverage of county and rural markets. (See “Reinvesting in wealth management: what are the odds for the ‘most downscaled bank’ to win?”) This description is highly similar to ABC-related statements.

Why are contenders racing for the county-level market at this time? The answer needs to be found in a larger macro backdrop.

Over the past two decades, real estate and its upstream and downstream industry chains have been the main destinations for bank credit, and they have been relatively high-return areas after risk adjustment. Now this logic no longer holds. Banks face a dilemma: within a risk level they can bear, they cannot find enough credit assets of sufficient scale and quality. In 2025, the non-performing loan formation rate for real estate-related loans is still rising, and provisioning charges continue to erode profits. At the same time, banks voluntarily shrink their risk exposures to control risk, limiting asset expansion. Under “pressure on both quantity and price,” banks have to look for new growth points.

Alongside the adjustment in real estate comes structural weakness in credit demand, and risk exposure in traditional high-yield assets (such as urban investment platforms and real estate trusts). In 2025, the growth rate of medium- and long-term corporate loans slowed down, and the share of bill financing increased, reflecting insufficient effective financing demand in the real economy. For state-owned major banks that have traditionally been city-focused, their organizational structures, staffing allocations, and risk control systems have been designed around urban customers, and shifting down to county-level markets entails high conversion costs. But if no strategic adjustment is made, they can only “compete in a crowded market” in the stock market, with profit margins continuing to compress.

Meanwhile, the sustained decline in net interest margins remains a common feature of the banking industry. According to the latest data from regulators, commercial banks’ net interest margins have hit a record historical low, and in some banks their margins are approaching the “warning line” of 1.20%. Among the six state-owned major banks, except for Postal Savings Bank, which maintains a relatively higher net interest margin thanks to its deposit advantages, the other five have net interest margins below 1.30%, and all have seen year-on-year declines. The core of margin management is shifting from “asset-side pricing” to “liability-side costs” and “structural optimization.” This means that whoever can obtain stable funding with lower liability costs will gain more buffer space in a period of falling interest rates.

It is precisely against this backdrop that the value of the county-level market has been rediscovered.

There is “stickiness” in the transmission of county-level interest rates: due to factors such as customer relationships, service convenience, and information opacity, the lag and attenuation of the transmission of LPR (loan prime rate) cut-offs can, in a period of falling interest rates, actually create income protection. The maturity structure of “short assets, short liabilities” in county-level markets—loans mainly with short- to medium-term maturities, and deposits mainly with demand and short-term maturities—also reduces exposure to interest rate risk and increases the initiative in net interest margin management.

Compared with urban business, some high-quality enterprise loan rates in major cities have already fallen to below 3% and even close to 2%, while the average yield on county-level loans is still around 3%. After taking into account risk costs, actual returns may be higher. The advantage in county-level deposit costs comes from strong residents’ willingness to save and low sensitivity to interest rates. Banks therefore do not need to win deposits through high-interest-rate competition, but rather rely on service convenience and brand trust to maintain customer relationships.

From the policy environment, the Rural Revitalization strategy provides institutional dividends to county-level finance—such as the People’s Bank of China’s policies on financial support for agriculture, fiscal interest subsidies, and risk compensation mechanisms—which reduce the policy costs of county-level business. From the competitive environment, the county-level market’s existing systems of rural commercial banks and rural credit cooperatives have shortcomings in service capability and technological level, leaving room for state-owned major banks to move down.

The strategic shifts of major banks such as CCB and ICBC are the result of the joint action of the above macro background and the characteristics of the county-level market.

Enter early, and go deep

Between “seeing opportunities” and “grabbing opportunities,” there is a gulf. The complexity of county-level finance—dispersed customers, small deal sizes, and high service costs—together with unique risk characteristics where standardized risk-control models are limited in effectiveness; and the strong relational nature where short-term investment cannot easily form “stickiness”—determines that this is not a “quick business,” but rather “slow but steady craftsmanship.”

ABC’s county-level layout can be traced back ten years.

In terms of physical coverage, nearly 57% of ABC’s outlets and personnel are located in county-level areas, covering all county-level areas. In terms of strategic staying power, in its annual reports for three consecutive years, 2023 to 2025, ABC has consistently positioned itself as a “leading bank serving Rural Revitalization” and repeatedly emphasized “continuously improving the county-level business operating system.”

In resource allocation and performance incentives, county-level business receives tilted policies such as separate credit plans, differentiated capital measurement, and dedicated expense support. As early as the 2022 annual report, ABC made clear that county-level areas are an “important focus for stabilizing growth.” County-level business indicators carry a relatively high weight in the performance appraisal of branch institutions, and they are linked to resource allocation. This prioritization differs from how some banks treat the county-level market as a “specialty business” or a “supplementary segment.” In ABC’s case, county-level areas are not a test field for marginal innovation, but the core battlefield for value creation.

In terms of organizational guarantees, the board of directors has established the “County-Level Business and Inclusive Finance Development Committee.” This is the first board-level special committee among state-owned major banks dedicated specifically to county-level business and inclusive finance, elevating county-level business to the highest tier of corporate governance. At the executive level, there is a dedicated post for a director of county-level business to coordinate day-to-day operations and management. This kind of setup is quite rare in the banking industry.

In vertical management, from the head office down to county-level sub-branches, most regional branches have dedicated departments or teams for county-level business, forming an “upward and downward coordinated” mechanism: strategic innovations from the head office can be quickly piloted and rolled out, while frontline practical explorations can also feed back and be upgraded.

This county-level system, developed through years of evolution, has formed institutionalized arrangements in strategic positioning, organizational structure, resource allocation, and performance incentives, creating a self-reinforcing positive feedback loop.

An even more defensive barrier is ABC’s integrated system of “infrastructure + data + processes.”

With dual engines of digital outreach and offline collaboration, the monthly active users (MAU) of its “rural version” mobile banking rose from 33 million at the end of 2023 to 52 million at the end of 2025—an increase of nearly 58% over two years. In 2025, ABC newly set up 1,742 farmer-benefit service stations. These “lightweight outlets” work in synergy with mobile banking. ABC also built an online-and-offline integrated delivery system: customers can submit service requests from any touchpoint, and the system intelligently assigns the request to the most suitable delivery channel based on the complexity of the business and customer preferences.

CCB, ICBC, and Postal Savings Bank are all playing catch-up. CCB relies on technological advantages to develop platforms such as “Yunongtong.” ICBC’s “digital inclusive finance” model tries to reduce costs through big-data risk control and online operations, but the former still has obvious gaps compared with ABC in terms of outlet coverage depth and customer data accumulation; the latter views the county-level market as an “extension of urban finance expertise” rather than an independent strategic domain, contrasting with ABC’s deep-anchored logic of “rooted in rural areas.” Postal Savings Bank indeed treats the county-level areas as its core basic base, but its customer focus leans toward small and micro enterprises and retail business.

As peers all move down, competition for county-level and prefecture-level finance will inevitably become fiercer.

County-level finance does not equal high risk

ABC’s asset scale is expanding rapidly against the headwind, especially with county-level loans growing by more than 20% over two years, and its “Huinong e-loan” growing fourfold over four years. This phenomenon prompts market questions: while scaling is in a frenzy, has asset quality been left behind? Is county-level finance riskier?

The answer ABC provides appears to run counter to conventional wisdom.

By the end of 2025, ABC’s non-performing loan ratio achieved a “five-in-a-row” decline like the other four state-owned major banks (Postal Savings Bank saw a slight year-on-year increase in 2025). However, ABC’s non-performing loan ratio is slightly higher than BOC and Postal Savings Bank. Although the provision coverage ratio, like the other banks, achieved a “five-in-a-row” decline (BOCOM saw a slight year-on-year increase in 2025), it remains the highest among the six state-owned major banks, close to 293%. ABC’s loan loss reserve balance stays above RMB 1 trillion and is also ranked first among comparable peers.

More notably, ABC is the only bank among comparable peers whose delinquency rate is lower than its non-performing loan ratio, and it has maintained a negative “spread gap” between delinquency and non-performing loans for five consecutive years. This means that ABC applies standards in asset quality recognition that are far stricter than what regulators require.

County-level asset quality is even more outstanding. In 2025, the non-performing loan ratio for ABC’s county-level business fell from 1.21% to 1.13%, below the bank-wide average level of 1.27%, completely breaking the stereotype that “county-level equals high risk.” This improvement happened against the backdrop of rapid growth in county-level loans of 11%.

The drivers behind the improvement in the non-performing loan ratio are multiple. Optimization of customer structure—greater support for high-quality farmers, new-type agricultural business entities, and agriculture-related small and micro enterprises, along with exiting high-risk customers; enhancement of risk control capabilities—leveraging digital tools and data from the agricultural industrial chain to strengthen risk identification and early warning; and stronger disposal efforts—accelerating collection and handling of existing stock of non-performing loans. The combined effect of these factors has led county-level asset quality to show a positive trend of “incremental improvement and stock recovery.”

ABC Vice President Lin Li has a thought-provoking description on this. He sees risk management as the core “watershed” for commercial banks over the next two to three years, and he said frankly: “Products can be homogenized, services can be homogenized, and even artificial intelligence technologies in the future may tend to be homogenized—but the differentiation in risk management is objectively present and is crucial.” Addressing the characteristics of inclusive retail loans—“small, scattered, and numerous”—Lin used a vivid expression: “We won’t let it be ‘disheveled,’ but instead we want it to be ‘neat and sharp.’”

On an increasingly intense county-level battleground, whether ABC can still maintain its first-mover advantage, whether its non-performing loan ratio will continue to decline, and when its net profit amount will catch up to its size position—these have become the market’s focal points.

Southern Weekend researcher Zhu Jiangshui

Editors Feng Yu