Key to high-quality development in the era of low interest rate — EY releases Listed banks in China: 2024 review and outlook

EY Greater China Region today released its Listed Banks in China – 2024 review and outlook (Executive summary). The report delves into the latest changes in the operating performance, asset quality, business development and operating model of 58 listed banks¹ in China in 2024. It also sheds light on their directions and strategies moving forward, as well as explores the path of high-quality development of the banking industry in the current low-interest rate era.

The EY team concurrently released an overview 1Q25 results for 42 Chinese A-share listed banks. The overview shows that the net profit of 42 A-share listed banks in Q1 of 2025 (the “period”) decreased by 1.09% year-on-year (YOY), and the operating income decreased by 1.72% YOY; the total assets at the end of the period increased by 3.94% compared with the end of 2024; the weighted average non-performing loan (NPL) ratio was 1.23%, down 0.01 percentage point from the end of 2024; and the provision coverage ratio was 237.99%, down 1.98 percentage points from the end of 2024. Overall, listed banks still face substantial operating pressure in the period.

NIM continues to narrow and macroenvironment uncertainty increases

Affected by factors such as the continued downward trend in market interest rates, reductions in interest rates on existing mortgage loans and continued concessions to the real economy, the net interest margin (NIM) of listed banks further narrowed in 2024. The average NIM was 1.52%, down 17 basis points from the previous year. It has been declining for five consecutive years, and the NIM has remained below 2% in the past three years. Affected by the narrowing NIM, the net interest income of listed banks in 2024 decreased by 2.20% YOY, marking the second consecutive year of decline.

Kelvin Leung, EY² Greater China Financial Services Partner, says: “Entering a cycle where both interest rates and NIM are low, the banking industry is facing increased uncertainty in the macro-environment, weak growth momentum in major international economies, ongoing geopolitical tension, intensified trade disputes and financial market volatility, insufficient domestic effective demand and a volatile foundation for economic recovery. This complex and evolving landscape poses significant challenges to both the operation and development of listed banks. Faced with these challenges, listed banks are fortifying themselves through various measures. They are diversifying revenue sources to expand non-interest income and optimize revenue structure, replenishing capital through multiple channels to strengthen their ability to serve the real economy, aligning with national strategies by focusing development in the ‘five major areas’, namely technology finance, green finance, inclusive finance, pension finance and digital finance, as well as exploring new opportunities for business development. Additionally, listed banks also proactively optimizing their debt structure, reducing debt costs, enhancing operational efficiency, controlling the growth of operating expenses, strengthening risk management and reducing credit costs.”

Retain performance through cost efficiency

In response to the challenge of declining revenue from NIM, listed banks have vigorously expanded their financial businesses, advancing the integrated operational model. Revenue beyond net interest income and net fee and commission income increased by 25.93% YOY, accounting for 14.40% of operating income, up 2.96 percentage points from 2023. Notably, investment income and income from changes in fair value increased by 29.84% YOY. At the same time, listed banks have made proactive investments in enhancing the initiative, methodology and foresight of asset-liability management, strengthened market research and analysis, actively optimized their liability structure and reduced capital costs. In 2024, the deposit interest rate of listed banks was 1.82%, marking a 15 basis points decrease from 2023.

To enhance operational efficiency, listed banks adhered to comprehensive cost management in 2024 by optimizing expense structure, strictly controlling general expenses, and actively supporting technological innovation and digital operations. The weighted average cost-to-income ratio of listed banks in 2024 was 32.47%, showing a slight increase of 0.31 percentage points from 2023, but the growth rate slowed down by 0.67 percentage points from 2023. Business and administrative expenses totaled RMB1,902.05 billion, up 1.08% YOY, with the growth rate slowing down by 1.10 percentage points from 2023.

Through the measures above, listed banks achieved an operating income of RMB5.87 trillion in 2024, a YOY increase of 0.06%, and a total net profit of RMB2.22 trillion, a YOY increase of 2.42%.

Seek new opportunities through the “five major areas” 

Following the national goals outlined in 2024, listed banks have substantially intensified their focus on the “five major areas” to boost new quality productivity³. By the end of 2024, the total loan balance of strategic emerging industries at the four major banks – Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank – exceeded RMB10 trillion, an increase of 22.62% from the previous year. Additionally, by the end of 2024, the loan balance of technology-based enterprises at 10 joint-stock banks exceeded RMB4.2 trillion, an increase of 21.93% from the previous year.

Benny Cheung, EY⁴ Greater China Financial Services China South Markets Leader, says: “Through sustained efforts in promoting innovation in the scope of technology finance, which includes establishing specialized organizations and taskforces, customizing credit standards and optimizing collaboration models with securities, guarantees, venture capital and other institutions, listed banks and their services have expanded to cover the entire life cycle of tech companies. This advancement not only propels the nation’s high-quality development but also enhances new quality productivity.”

With sustainability embedded into the strategies and operations of listed banks, their green finance and inclusive finance businesses have continued to develop rapidly. All 58 listed banks have released data concerning green loans. The total balance of green loans was RMB27.72 trillion by the end of 2024, an increase of 20.60% from the end of 2023, which is 12.70 percentage points higher than the overall loan growth rate. Moreover, 53 listed banks have disclosed their figures on inclusive loans. At of the end of 2024, the total loan balance was RMB21.74 trillion, an increase of 18.33% from the end of 2023, which is 10.43 percentage points higher than the overall loan growth rate.

By establishing a comprehensive system offering a plethora of pension financial services including pension account management and financial product design, listed banks have continued to strengthen their offerings in personal pension services, supporting the growth of the silver economy in all aspects. As of the end of 2024, among the 22 listed banks qualified for personal pension business operations, 17 have also launched public funds, commercial pension insurance, wealth management and savings services. Cheung says: “In 2024, the retail business of listed banks will face new challenges, with a YOY decline in operating income and pre-tax profit contribution. Pension finance is set to emerge as an important domain for listed banks to explore new momentum for retail development.”

With the rapid advancement of digital finance and transformation, 25 listed banks disclosed their technology investment amounts in their annual reports, totaling RMB197.274 billion, which remains relatively stable compared to the previous year. 27 listed banks have revealed the number of fintech/IT personnel in their annual reports, showing the total number of relevant tech personnel exceeded 161,200, an increase of 11.84% from the end of 2023. Leung says: “Listed banks are increasingly focusing on the input-output ratio and the linkage between technology and business in their technology investment, shifting their focus from construction to efficiency. Banks have committed to accelerating digital financial innovation, optimizing business operation systems, and enhancing service capabilities. Combined with the innovative development of new technologies such as big artificial intelligence models, they continue to explore application scenarios for emerging technologies in traditional banks, providing solid support for optimizing the financial supply structure comprehensively and improving bank operating efficiency and security.”

Augment risk management frameworks for a solid basis of high-quality development

Risk prevention and management continued to be a key focus for listed banks, as they enhanced their capabilities in risk prediction, response and management. At the end of 2024, the total balance of non-performing loans of listed banks was RMB2,286.667 billion, an increase of RMB129.899 billion from the previous year. The weighted average ratio of non-performing loan dropped from 1.28% at the end of 2023 to 1.26%. The provision coverage ratio remained stable. At the end of 2024, the weighted average provision coverage ratio of listed banks was 237.10%, down 3.34 percentage points from the end of 2023. With effective efforts to reduce credit costs, the credit cost in 2024 was 0.66%, a YOY decrease of 0.10 percentage points. The impairment losses have decreased by 5.47% compared with 2023.

Capital adequacy among listed banks was steadily improved through the implementation of the new capital regulations and capital replenishment in a structured manner. At the end of 2024, the average core tier 1 capital adequacy ratio of listed banks was 11.53%, up 0.47 percentage points from the end of 2023; the tier 1 capital adequacy ratio was 13.19%, up 0.45 percentage points from the end of 2023; and the capital adequacy ratio was 16.58%, up 0.67 percentage points from the end of 2023. Leung says: “With national support and favorable policies, capital of listed banks will be further consolidated by means of capital increase for large banks from the Ministry of Finance, and local governments' issuance of special bonds to support small and medium-sized banks to supplement capital, which will further consolidate the capital foundation of listed banks.”

Looking ahead to 2025, Cheung believes that China’s economy will continue its path to recovery, presenting more opportunities to listed banks. However, uncertainties and challenges are expected to persist. To progress effectively, listed banks need to stay susceptive to policy guidance and national strategies that support the real economy, while also addressing the difficulties associated with the era of low-interest rate. It is crucial for listed banks to actively pursue value creation, establish a more stable, balanced and resilient income, business and asset structure. By implementing a more sophisticated risk management approach and enhancing operational efficiency, listed banks can persevere, adapt to transformations and navigate economic cycles, ultimately charting a course towards high-quality development.

1. 15 A+H-share listed banks, 27 A-share listed banks and 16 H-share listed banks are included, with total assets and net profit accounting for 83% and 96% of all commercial banks in China, respectively.
2. Ernst & Young Hua Ming LLP
3. China unleashes new quality productive forces in push for reform, innovation, State Council, 9 May 2025 (https://english.www.gov.cn/news/202406/25/content_WS667a2943c6d0868f4e8e8835.html#:~:text=First%20introduced%20in%202023%2C%20new,mode%20and%20productivity%20development%20paths)
   
4. Ernst & Young (EY member firm in Hong Kong)

-Ends-

Notes to Editors

About Listed banks in China: 2024 review and outlook

This is the 18th EY annual report on China’s listed banks. The purpose of this annual report is to provide an outlook on the direction of the future development of China’s banking industry based on the observations of the businesses, operating models and regulatory environment of listed banks in China.

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