Everything is declining, so why is China Minsheng Bank's net interest margin defying the trend and rising?

Ask AI · How Can Peer Self-Discipline Help Minsheng Bank Turn Around Its Net Interest Margin?

Interface News reporter | Yang Zhijin

Interface News editor | Wang Shu

On March 31, Minsheng Bank (600016.SH, 01988.HK) held its 2025 annual performance briefing.

The day before, Minsheng Bank’s annual report showed that, as of the end of 2025, the bank’s total assets were 7.83 trillion yuan, up 0.23% year over year; operating income was 78.3k yuan, up 4.82% year over year; and net profit attributable to shareholders was 142.87B yuan, down 5.37% year over year.

Against the backdrop of net interest margins declining across the industry, Minsheng Bank’s net interest margin rose against the trend—why is that? With operating income growing by nearly 5%, why did Minsheng Bank’s net profit attributable to shareholders decline by more than 5%?

Big Drop in Interbank Deposit Costs

In recent years, one major issue faced by Chinese commercial banks has been the narrowing of net interest margins. According to statistics by Interface News reporter, among 22 A-share listed banks that had already released their 2025 annual reports as of March 31, 18 saw their net interest margins decline, 2 stayed flat, and 2 moved up. Among them, Minsheng Bank’s net interest margin was 1.4%, compared with a slight rise of 1 basis point from the previous year.

Analysis suggests that Minsheng Bank’s net interest margin increase did not come from higher asset yields, but from lower funding costs. Moreover, the decline in the interest-bearing cost rate on the liability side was greater than the decline in the yield rate on the asset side.

The annual report shows that in 2025, Minsheng Bank’s average interest-bearing rate on liabilities was 1.81%, down 46 basis points from the previous year. In the same period, the average yield rate on the asset side was 3.12%, down 43 basis points from the previous year. The decline in the latter was 3 basis points less than the former.

Screenshot by Interface News reporter from Minsheng Bank’s annual report

“Because we strengthened the fine management of deposit liabilities, the deposit interest payout rate fell by 40 BP. Thanks to the decline in our liability costs, our net interest margin can remain stable, and it has even risen slightly.” Minsheng Bank President Wang Xiaoyong said at the industry performance meeting.

Minsheng Bank Vice President and Secretary to the Board Li Bin said that Minsheng Bank uses key businesses such as payroll settlement and merchant acquiring, as well as wealth management, to effectively drive an increase in the proportion of demand deposits. At the same time, it strengthens the management of medium- and long-term deposits and continuously optimizes the deposit maturity structure, leading to a full-year decline of 40 basis points in the deposit interest payout rate.

A decline in deposit costs is an important factor, but a decline in peer-to-peer interbank deposit costs may have an even bigger effect. The annual report shows that the average cost rate of interbank and other financial institution placements fell by 58 basis points, far exceeding the declines in deposit costs and total liability costs.

“On the one hand, we strengthen the integrated operation of interbank clients to expand sources of interbank funding. On the other hand, based on liquidity conditions, we conduct forward-looking analysis of the market, flexibly control the timing of funding absorption, and properly arrange the structure of maturities and products—so the interbank funding cost decline for the full year was also fairly evident.” Li Bin said.

“Probably it’s the contribution of peer self-discipline.” A person from the asset-liability department of a joint-stock bank told Interface News reporter.

“Peer self-discipline” refers to requirements issued by regulators in November 2024: Non-bank interbank demand deposits should determine the interest rate level by referring to the 7-day reverse repo operation rate; if banks and non-bank financial institutions (including non-legal-entity products) agree that interbank term deposits can be withdrawn early, the early withdrawal interest rate should, in principle, not be higher than the interest rate on excess reserve deposits.

In practice, interbank deposit rates were higher before self-discipline. For example, for Minsheng Bank, in 2024 the average cost rate of interbank deposits was 2.29%, which was 15 basis points higher than the general deposit interest payout rate. After self-discipline supervision, in 2025 the average cost rate of interbank deposits was 1.71%, already below the general deposit interest payout rate.

Li Bin said that in 2026, commercial banks’ margin management will face both challenges and supportive factors. The challenges mainly come from loan repricing and structural changes—loan interest rates will decline to some extent—while competition for deposits remains intense, leaving limited room for deposit cost declines. Favorable factors include the economic and industrial development transition, stronger policy coordination, and efforts that will create opportunities for the banking industry’s development.

“In 2026, we will continue to firmly focus on foundational clients, foundational products, foundational services, and fine-grained management, striving for margin stability, and support growth in net interest income on the basis of a balance between volume and price.” Li Bin said.

“People are relatively optimistic about this year’s margins. The core reason is that large-scale high-interest time deposits on the deposit side are maturing and being repriced. That is an important reason why bank margins may stabilize this year.” The aforementioned asset-liability department person of the joint-stock bank told Interface News reporter.

Strain in Asset Growth

Compared with the stabilization and rebound in yields, Minsheng Bank’s “volume” growth faces some pressure.

According to the annual report, as of the end of 2025 Minsheng Bank’s total assets were 7.83 trillion yuan, up slightly by 0.23% year over year. This increase was the lowest among the 22 listed banks that had already disclosed their annual reports.

Among them, Minsheng Bank’s retail loans fell by 5.18%, leading to a slight year-over-year decline in loans and advances, while corporate loans grew by 2.68%.

Screenshot by Interface News reporter from Minsheng Bank’s annual report

Wang Xiaoyong said that Minsheng Bank’s asset scale grew steadily and its asset structure was optimized. This is mainly reflected in general-purpose loans (excluding bills) growing by 1.7%, with their share in total assets increasing by 0.8 percentage points. At the same time, green loans, medium- and long-term manufacturing loans, and inclusive loans grew by 20.3%, 6.9%, and 2.3%, respectively, all higher than the average loan growth rate.

Against the backdrop of a slight rebound in net interest margin and steady asset scale, in 2025 Minsheng Bank’s net interest income grew by 1.46%. Combined with two-digit growth in non-interest income, Minsheng Bank’s revenue grew by nearly 5% in 2025, but net profit attributable to shareholders fell by 5.37%.

This is mainly because Minsheng Bank increased the pace and amount of provision-making. Under accounting standards, making provisions for credit losses is recognized as credit impairment losses, which offsets current-period profit. When China’s banking industry has relatively high revenue growth, it tends to make more provisions; when revenue is not doing well, it makes fewer provisions, thereby smoothing profit.

The financial report data show that in 2025 Minsheng Bank’s credit impairment losses were 53.95 billion yuan, up 18.64% from the previous year, and up by approximately 8.5 billion yuan year over year.

Screenshot by Interface News reporter from Minsheng Bank’s annual report

Wang Xiaoyong said: “Because last year we increased the disposal of non-performing assets and increased the amount of provisions, so in the context of revenue growth, profit actually declined.”

Minsheng Bank Vice President Huang Hongri said that the increase in provision-making last year was, on the one hand, affected by macroeconomic cycle factors, leading to an increase in newly generated non-performing assets. On the other hand, we proactively increased the intensity of risk disposal. This change aligns with industry trends and reflects the requirements for steady and prudent business management.

“Taking into account both the pace of resolving existing stock risks and the risk control over new businesses, we expect that the impairment losses of our bank in the coming year will generally show a trend of stability with a slight increase overall.” Huang Hongri said.

Because it increased the amount of provisions, Minsheng Bank’s provision coverage ratio improved: as of the end of 2025, the provision coverage ratio was 142.04%, up 0.10 percentage points from the end of the previous year. However, compared horizontally, this level is relatively low among listed banks, and there is still room to improve.