Ask AI · Can the dual-driven approach of retail business and AI technology help it navigate through cycles?

Author | Gong Xingchao

Editor | Wu Wentao

In 2026, coinciding with Minsheng Bank’s 30th anniversary, this China’s first nationwide joint-stock commercial bank primarily owned by non-public enterprises delivered a mixed annual report amid industry deepening reforms.

Profitability Challenges During Transformation

“Global Finance” reviewed key data from Minsheng Bank’s 2025 annual report and found that the company achieved an operating income of 142.87B yuan, up 4.82% year-over-year. In an industry environment where the net profit of joint-stock commercial banks declined overall in 2025, this positive revenue growth demonstrates resilience in its core operations.

In stark contrast, the net profit attributable to the parent was 30.56B yuan, down 5.37% year-over-year, with basic earnings per share of 0.63 yuan, a slight decrease of 1.56%. The feature of increasing income but not profit highlights the unavoidable profitability difficulties during its transformation.

Looking at quarterly operations, Minsheng Bank’s net profit improved quarter by quarter, with 2.02B yuan in net profit in the fourth quarter, up 11.66% year-over-year. The quarterly recovery signals a bottoming out of profits, but whether the turning point has truly arrived still requires ongoing validation from subsequent operational data.

The core drag on profitability stems from a sharp rise in credit impairment losses. In 2025, the company’s total credit impairment provisions amounted to 53.95 billion yuan, a significant increase of 18.64% year-over-year. Large-scale provisioning directly eroded profit margins gained from revenue growth, becoming the main factor constraining performance release at this stage.

In terms of asset quality, as of the end of 2025, Minsheng Bank’s non-performing loan (NPL) balance was 66.15B yuan, an increase of 544M yuan from the previous year-end. The NPL ratio slightly rose to 1.49%, higher than the 1.21% industry average for joint-stock banks at year-end 2025; the loan loss reserve coverage ratio only increased marginally by 0.1 percentage points to 142.04%, well below the industry average of 207.2%, indicating a relatively thin risk buffer and a generally slow pace of risk clearance.

Regarding profitability indicators, in 2025, the company’s average return on equity (ROE) was only 4.93%, far below the 10.27% average of listed banks disclosed in their annual reports, placing it in the lower range among listed joint-stock banks. There remains considerable room for improvement in shareholder capital returns.

Notably, amid persistent pressure on net interest margin (NIM) industry-wide, Minsheng Bank’s NIM stabilized at 1.4%, an increase of 1 basis point year-over-year, becoming a key highlight of the annual report. This achievement mainly results from refined management of liabilities, with the deposit interest payout rate sharply reduced by 40 basis points to 1.74%, and a significant decline in interbank funding costs. Meanwhile, asset structure continued to optimize, with general loans increasing to 55%, and asset operation efficiency improving markedly.

On capital and dividend distribution, as of the end of 2025, the bank’s capital adequacy ratio was 13.06%, with a core Tier 1 capital adequacy ratio of 9.38%. All safety indicators steadily improved, strengthening the capital safety cushion for its transformation efforts.

From the underlying logic of performance growth and current operational status, Minsheng Bank is at a critical stage of shifting from scale expansion to quality and efficiency enhancement. Facing the common pressure of narrowing industry interest spreads, the bank has anchored its transformation on retail business and AI technology, striving to build differentiated competitive advantages. The success of these two core areas will directly determine the progress and quality of its transformation.

As the long-term strategic core, retail business made substantial progress in 2025 in customer acquisition, scenario layout, and product refinement. The number of new customers increased by 19.16% year-over-year, new customer AUM (assets under management) grew by 30%, and the number of value-added customers via agency payments increased by 10.05%. These measures achieved both scale and quality improvements in customer acquisition. Wealth management, through deepening customer segmentation and classification, continued to optimize high-net-worth client services, becoming the main engine of retail growth.

The Pillar for Crossing Cycles

In product and scenario deployment, Minsheng Bank precisely linked high-end consumption scenarios, deepening strategic cooperation with Sam’s Club. Co-branded credit cards issued exceeded 1.3 million, with nearly 60% held by dual-card customers. Through scenario-based products, the bank accurately reached middle- and high-income groups, achieving high conversion rates and customer stickiness simultaneously.

Offline channels saw continued transformation toward lightweight branches. Community sub-branches’ financial assets exceeded 500 billion yuan, effectively bridging the “last mile” of financial services, with customer acquisition quality and service capacity in lower-tier markets significantly enhanced.

According to plans, in 2026, the bank will further leverage its retail “brain” digital platform to deepen full lifecycle customer services, optimize consumer loan asset structures, and make retail a true pillar for cycle resilience.

On technological empowerment, Minsheng Bank’s AI applications have evolved from “tool-based” to “model-restructuring” upgrades. In 2025, 261 new AI-specific scenarios were added, with daily AI service calls exceeding 5 million, and generative AI calls surged 16-fold year-over-year, covering front, middle, and back-office processes.

In specific business applications, intelligent review adoption rates for risk control exceeded 84%, legal contract review time was compressed from hours to minutes, and post-loan report generation efficiency increased by 20%. These technological advances significantly reduced human costs and improved risk detection accuracy and timeliness, strengthening operational stability.

In R&D, AI code generation reached 20.68%, directly boosting R&D efficiency by 10%. The upcoming autonomous programming mode of intelligent agents, scheduled for 2026, is expected to further increase R&D productivity by 30%, greatly shortening product innovation and deployment cycles, enabling faster responses to market and customer needs.

Overall, the comprehensive implementation of digital and intelligent transformation has become the core driver for Minsheng Bank’s cost reduction, efficiency enhancement, risk control, and customer experience improvement, serving as a key competitive advantage amid industry homogenization.

Currently, China’s banking industry is moving away from the previous extensive growth model based on scale expansion toward a deep transformation from “scale-driven” to “value-driven.”

With ongoing interest rate liberalization, net interest margin has stabilized in an “L-shaped” pattern. Traditional profit models relying on interest spreads are no longer sustainable. Wealth management, fintech, cross-border finance, green finance, and other light-capital non-interest income sources are recognized as the secondary growth curves. Banks are accelerating their differentiation strategies, and industry competition for existing assets is becoming increasingly clear.

Against this backdrop, Minsheng Bank, with its 30-year development foundation, has formed a unique core competitive advantage that is difficult to replicate. Its long-term investment value is gradually emerging.

As China’s first nationwide joint-stock commercial bank with a private sector background, Minsheng Bank has been rooted in serving the private economy and deepening real economy engagement. Its three decades of focus on private enterprises and small- and micro-sized businesses have built a solid customer base and service experience, enabling precise matching of financing needs and comprehensive financial services for private sector clients, and capitalizing on policy-driven market opportunities.

Building a Differentiated Barrier

In business deployment, Minsheng Bank’s asset custody scale surpassed 13 trillion yuan, maintaining a top-tier position. Custody services, as a light-capital, steady-income intermediary business, provide sustainable non-interest income and reduce reliance on traditional interest margin business.

Market activities such as client foreign exchange and credit bond sales have grown significantly, continuously optimizing the business structure. Its ESG rating remains at MSCI’s top “AAA” level globally, gaining high recognition from international capital markets, opening broad prospects for green finance and cross-border financing, and aligning with long-term global investment trends.

Meanwhile, in the wave of digital transformation, Minsheng Bank’s early advantage in AI technology application allows it to seize opportunities in industry transition by reshaping business models, reducing operational costs, and enhancing risk management, thereby creating a differentiated competitive barrier.

With the ongoing recovery of China’s macroeconomy, increasing demand for financing from the real economy, rising household wealth management needs, and a continuously improving environment for private sector development, the banking sector’s operating environment is gradually improving. Leveraging its early positioning in private economy services, wealth management, and fintech, Minsheng Bank is well-positioned to capitalize on market opportunities brought by economic recovery and achieve sustained performance recovery.

However, it must be noted that the bank’s transformation still faces multiple risks and challenges, and the basis for valuation reappraisal needs further solidification.

The profit turning point remains unclear, with net profit continuing to decline and high credit costs further suppressing performance recovery. Asset quality pressures persist, with slight increases in NPL ratio and relatively low provisioning coverage, indicating weak overall risk resilience. Given macroeconomic uncertainties, some industries may continue to see credit risks release, increasing asset quality management pressures.

Additionally, industry homogenization intensifies, net interest margins remain at historic lows, deposit competition is fierce, and state-owned banks continue to deepen customer penetration, likely pushing up funding costs and squeezing profit margins. Moreover, the bank’s core Tier 1 capital adequacy ratio ranks lower among joint-stock banks, with urgent capital replenishment needs, constraining future expansion and transformation.

In the secondary market, as of March 31, the stock price was 3.79 yuan, with a price-to-book ratio (PB) of 0.29, well below 1, indicating the stock trades below its net asset value. This reflects market concerns about asset quality, profit recovery prospects, and capital adequacy.

The low valuation also reveals cautious investor sentiment regarding the pace of short-term performance recovery and asset quality improvement, as well as skepticism about the effectiveness of its transformation.

In “Global Finance,” it is believed that Minsheng Bank’s painful transformation reflects the common difficulties faced by joint-stock commercial banks during economic transition. In the short term, profit recovery and asset quality improvement require time; macroeconomic recovery, interest rate trends, and credit risk clearance will introduce uncertainties.

Long-term, with retail deepening and AI-driven empowerment, if the bank can continue lowering funding costs, increasing non-interest income, and effectively clearing risks, fulfilling CEO Wang Xiaoyong’s promise of “quality refinement leading to momentum,” the current undervaluation presents a promising valuation reappraisal opportunity.

This veteran bank, after thirty years of storms, awaits whether it can break through and rebirth amid the industry’s new wave of transformation. The market is watching closely.

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