In recent years, the Return on Equity (ROE) of A-share listed banks has been under sustained pressure, with the 10% threshold becoming a critical benchmark for measuring profitability.

In the current operating environment, bank management is focusing on core profitability metrics.

Gu Jianzhong, Chairman of Bank of Shanghai, stated directly at the 2025 Annual and 2026 Q1 Results Conference: "The cost-to-income ratio is a false metric; what truly matters is ROE."

Wang Liang, the recently retired President of China Merchants Bank, also emphasized: "Only a bank that can maintain an ROE above 10% can create relatively good returns for its investors."

However, a review of Wind data reveals that an increasing number of banks are falling below this "defense line": Five years ago, in 2021, 33 out of 42 A-share listed banks had a weighted average ROE above 10%, with an industry average of 11.26%. By the end of 2025, the number of listed banks with an ROE above 10% had sharply decreased to 18, and the industry average had also declined to 9.61%. Among them, Bank of Chengdu led with an ROE of 15.39%, but there were also 7 banks whose ROE had fallen below 7%.

As the industry's divergence pattern of "the strong getting stronger, the weak getting weaker" becomes increasingly prominent, how to improve ROE has become a core issue concerning banks' long-term development. So, what are the driving factors behind this divergence? Although industry net interest margins showed signs of stabilizing in the first quarter of 2026, the market remains closely focused on this year's ROE trends and banks' strategies for increasing revenue.

A branch head from a joint-stock bank pointed out that for a bank to maintain or improve its ROE, it still relies on "low liability costs, strong asset pricing, superior asset quality, a good customer base structure, and stable non-interest income." He believes that "future divergence may become even more intense."

In his view, expanding non-interest income will become a key lever for each bank. The emphasis on investment versus wealth management should be determined based on the bank's own characteristics, with both short-term tactics and long-term positioning being very important. He particularly stressed that all efforts to increase returns must be based on strict risk control—"This is the crucial '1'; otherwise, all other efforts could amount to zero."

**Agricultural Bank of China and China Construction Bank Become the "Gatekeepers" for Big Banks' Double-Digit ROE**

The widespread pressure on listed banks' ROE and the intensifying divergence stem from both industry-wide challenges and differences in individual operations. The continuous narrowing of net interest margins is the core pressure—the average net interest margin for commercial banks had fallen to a historical low of 1.42% in 2025. Simultaneously, the trend of deposit terming and "deposit migration" has further increased banks' liability costs, squeezing profit margins.

On the numerator side, the year-on-year growth rate of net profit, which directly affects ROE, has slowed significantly: the growth rate of net profit attributable to shareholders of the parent for 42 A-share listed banks declined from 14.76% in 2021 to 2.13% in 2025.

On the denominator side, focusing on the large state-owned banks, analysis points out that in addition to industry-wide common factors, some large banks received special treasury bond capital injections from the Ministry of Finance in 2025. The resulting expansion of share capital also had a dilutive effect on ROE. According to a review of Wind data, the average ROE of the six large state-owned banks had fallen to 9.27% in 2025.

Among them, by the end of 2025, only Agricultural Bank of China and China Construction Bank successfully maintained an ROE performance above 10%, becoming the sole "gatekeepers" of double-digit ROE among the state-owned banks. Specifically, Agricultural Bank of China led the state-owned banks with an ROE of 10.16%, followed closely by China Construction Bank at 10.04%.

In contrast, the ROE of the other four large state-owned banks was below 10% at the end of 2025: Industrial and Commercial Bank of China at 9.45%, Bank of China at 8.94%, Postal Savings Bank of China at 8.67%, and Bank of Communications at 8.38%.

Looking at the trend of change, the ROE of the six major state-owned banks has been on a continuous downward trajectory over the past five years. Among them, Bank of Communications saw the largest single-year decline in 2025, with its ROE dropping sharply from 9.08% to 8.38%, a decrease of 0.70 percentage points. In terms of the five-year cumulative decline, Postal Savings Bank of China was the most significant, with its ROE falling from 11.86% in 2021 to 8.67% in 2025, a cumulative drop of 3.19 percentage points.

Zhang Yi, President of China Construction Bank, specifically mentioned at the 2025 results conference: "All business lines achieved effective qualitative improvement and reasonable quantitative growth. In 2025, CCB achieved 'dual growth' in operating income and net profit, with profitability improving quarter by quarter; core indicators such as a net interest margin of 1.34% and an ROE of 10.04% maintained a leading position among comparable peers."

**Only China Merchants Bank Remains Among Joint-Stock Banks with ROE Above 10%**

Compared to state-owned banks, the joint-stock bank cohort has become a "lowland" for ROE decline. Data shows that the average ROE of 9 listed joint-stock banks in 2025 was only 8.33%, relatively low among different types of banks. Currently, only China Merchants Bank maintains an ROE above 10%, with a sharp divergence between the leading and middle-tier banks.

Looking back to 2021, there were still four joint-stock banks—China Merchants Bank, Industrial Bank, Ping An Bank, and China CITIC Bank—with ROE above 10%. By 2025, only China Merchants Bank remained. CMB stands out among joint-stock banks with an ROE of 13.44%, which is precisely the source of the "confidence" behind former President Wang Liang's statement at the beginning of this article.

Currently, China CITIC Bank, Ping An Bank, and Industrial Bank have ROEs of 9.39%, 9.15%, and 9.15% respectively, forming the second tier among joint-stock banks. Pressure is greater for tail-end banks, with China Minsheng Bank having the lowest ROE among joint-stock banks at 4.93%; Shanghai Pudong Development Bank and China Zheshang Bank have ROEs of 6.76% and 6.80% respectively.

On the timeline, 2023 was the year when ROE declined most sharply for many joint-stock banks. For example, Industrial Bank's ROE plummeted from 13.85% in 2022 to 10.64% in 2023, a single-year drop of 3.21 percentage points.

Wang Liang stated at CMB's "final performance" results conference: "The board of directors and management attach great importance to ROE management. We judge that ROE will continue to decline in the future and will manage the pace of decline with 10% as the baseline. CMB's ROE still leads both domestic and foreign banks, and we will do our utmost in management."

**Over Half of Listed City Commercial Banks Maintain ROE Above 10%**

Among various types of banks, city commercial banks appear relatively optimistic overall, relying on regional credit customer resources and specialized businesses.

A review reveals that the average ROE of 17 listed city commercial banks in 2025 was 10.22%, making them the only group among various bank types whose average still remains above 10%. However, the gulf in profitability within this group is also vast, presenting a distinct hierarchical pattern.

Among them, Bank of Chengdu has consistently ranked first in ROE among A-share banks for five consecutive years. Although its 2025 ROE of 15.39% receded from the 2021 high of 17.60%, it still leads by an absolute margin. Bank of Hangzhou, Bank of Jiangsu, and Bank of Ningbo form a solid second tier with ROEs of 14.65%, 13.14%, and 13.11% respectively.

Overall, a total of 9 city commercial banks maintained an ROE above 10% in 2025, accounting for more than half, including Bank of Qingdao, Qilu Bank, Bank of Nanjing, Bank of Changsha, and Bank of Suzhou, demonstrating strong profit resilience.

However, some city commercial banks also face challenges in their ROE performance. Zhengzhou Bank's ROE fell consistently from 7.17% in 2021 to 3.16% in 2025, remaining at the bottom of the industry for an extended period. Bank of Beijing's ROE also declined from 10.29% in 2021 to 6.11% in 2025.

Industry insiders believe that under the common pressure of narrowing net interest margins, differences in operational quality, efficiency, and asset quality among banks in different regions are becoming further apparent.

**Changshu Bank Firmly Holds the "Leading" Position Among Rural Commercial Banks**

The ROE performance of listed rural commercial banks presents a situation of "the strong remain strong, while the tail end faces pressure." The average ROE of 10 sample rural commercial banks in 2025 was 9.92%. Among them, Changshu Bank leads by a wide margin with an ROE of 14.05%, which is 4.13 percentage points higher than the 2025 average for listed rural commercial banks. Its ROE has consistently remained above 10% over the past five years, demonstrating extremely strong profit resilience.

Furthermore, the ROE of Sunong Bank, Jiangyin Bank, Zhangjiagang Bank, Ruifeng Bank, and Bank of Wuxi also stand at 10% and above, at 10.84%, 10.71%, 10.36%, 10.20%, and 10.05% respectively, forming the "top student" camp among rural commercial banks. Among them, Ruifeng Bank has shown minimal fluctuation in ROE over the past five years, highlighting its stability; Sunong Bank's profitability has shown a steady upward trend.

In contrast, tail-end institutions face significant adjustment pressure. Zijin Bank's ROE decreased year by year from 9.85% in 2021 to 6.17% in 2025, a cumulative decline of 3.68 percentage points. Qingdao Rural Commercial Bank also fell from 10.63% in 2021 to 7.94% in 2025, dropping below the 8% mark. Chongqing Rural Commercial Bank and Shanghai Rural Commercial Bank, two rural commercial banks with larger asset sizes, also failed to maintain an ROE above 10% in 2025.

**The Tests of Interest Margins, Deposit Costs, and Transformation**

Delving into the reasons for ROE divergence, Lin Yingqi, Banking Analyst and Director at China International Capital Corporation Limited, stated: The decline in bank ROE is mainly due to slowing loan growth, continuously declining net interest margins, and rising pressure from provision set-asides against the backdrop of economic transformation. He analyzed that under the trend of deposit migration, competition on the liability side of banks is intense, and non-performing assets in retail and real estate sectors are still being resolved. High-quality leading banks maintain relatively higher ROE by virtue of lower liability costs and robust asset quality.

Liu Chengxiang, Chief Banking Analyst at Kaiyuan Securities Research Institute, stated that by the end of 2025, only 18 listed banks had an ROE exceeding 10%. This was mainly due to the wave of interest rate cuts and narrowing interest margins compressing traditional deposit-loan profits, forcing banks to seek new growth points. Deposit migration intensified competition on the liability side, making liability cost control capability a key dividing line. Banks capable of proactively upgrading strategies—such as realizing floating profits by trading bonds, developing wealth management fee-based income, and leveraging wealth management licenses or foreign exchange settlement advantages to accumulate low-cost deposits—were able to maintain a relatively high ROE in a low interest margin environment. Conversely, others fell into the困境 of narrowing interest margins, deposit outflows, and profit pressure. Therefore, industry-wide common pressures have instead amplified the capability gaps between banks.

A staff member from a city commercial bank's fund operations center stated that for listed banks to defend their ROE performance, the key is whether asset quality continues to deteriorate and if the downward migration trend can be halted. This leads to widening gaps in provision set-asides between different banks. Secondly, the extent to which non-interest income can contribute is also one of the factors causing ROE divergence.

From this person's perspective, "In the current business transformation and upgrading of the banking industry, one of the more important directions is shifting from a model of 'determining loans based on deposits to control risk and accumulate interest spreads' to a trading bank model that uses asset securitization as a means to raise funds, rolling over to form assets for re-securitization to accumulate management fees. This can also be described as the 'investment banking-ization of traditional commercial banking business.'"

Facing challenges, the banking industry is also actively seeking ways to break through. Entering the first quarter of 2026, the industry reached a critical inflection point, with net interest margins gradually stabilizing and rebounding, and over 80% of banks seeing a year-on-year positive turn in net interest income. This has created favorable conditions for the stabilization of ROE.

Regarding the trend of bank ROE in 2026, Liu Chengxiang predicts that the momentum for stabilization and recovery will come from three aspects:

First, net interest margins have shown an inflection point—the calculated net interest margin for Q1 2026 rebounded by 1 basis point to 1.40% compared to the full year 2025. Furthermore, liability costs continue to decline due to the repricing of maturing high-interest fixed deposits and the沉淀 of foreign exchange settlement funds. Most assets have entered a stage of positive interest spreads, significantly reducing the drag of interest margins on ROE.

Second, revenue growth has improved significantly. In Q1 2026, listed banks' operating revenue grew by 7.6% year-on-year, non-interest income remained stable, and floating profits from financial investments can still be flexibly realized.

Third, overall asset quality is稳健, and credit costs remain low, providing a more sustainable foundation for full-year ROE.

However, he also cautions that internal divergence remains evident: High-quality city commercial banks,凭借 their balance sheet expansion flexibility, asset pricing power, and non-interest income advantages, are expected to continue leading in ROE. Large state-owned banks benefit from rapidly improving liability costs and foreign exchange settlement红利, with ROE stabilizing and rising slightly. Some joint-stock banks still face pressure on the liability side, with limited improvement in ROE. Some city and rural commercial banks are constrained by rising关注 rates and narrowing space for provision反哺, resulting in potentially low absolute ROE levels.

"Overall, bank ROE in 2026 will bid farewell to a one-sided decline. However, from an investor's perspective, 'selecting banks carefully' remains key to obtaining excess returns," he stated.

Regarding banks'思路 for increasing收益, Lin Yingqi pointed out: First, control costs on the liability side and沉淀 funds through wealth management. Second, on the asset side,布局 AIC equity investments and technology innovation finance. Third, expand cross-border出海 and low-capital intermediate businesses, reduce reliance on traditional credit, and提升 comprehensive returns.

In Liu Chengxiang's view: First, optimize pricing—on the asset side, allocate reasonably guided by risk-adjusted returns; on the liability side, strengthen customer interest rate sensitivity analysis to achieve differentiated pricing. Second, expand the balance sheet flexibly—use bond investments flexibly to deploy surplus liquidity, increase allocation of long-duration bonds to lock in收益 when interest rates are favorable, and revitalize inefficient assets through asset流转 to improve overall asset收益率. Third, supplement with fee-based income—rely on wealth management subsidiary licenses to transform deposit migration into growth in asset management product scale,沉淀 funds, and contribute fee-based income. Fourth, manage provisions—flexibly write off, transfer, and recover non-performing loans to accelerate the removal of risky assets from the balance sheet,降低 credit costs. Simultaneously, recovering some written-off assets can generate additional收益. However, attention must be paid to balancing provision consumption with capital adequacy levels to avoid eroding core tier 1 capital due to exceeding deferred tax asset limits.