Investment returns are also crazy, with net profit contributions from the six major banks exceeding 14% each.

Our newspaper (chinatimes.net.cn) reporter Li Minghui Beijing reports

Recently, the annual reports of six state-owned major banks for 2025 have been sequentially disclosed.

The “Huaxia Times” reporter noted that in the face of a low-interest-rate, highly volatile market environment, even with increased investment difficulty, many state-owned major banks still achieved impressive investment performance, with four banks seeing their investment returns increase by more than 30%, and three of them contributing over 20% to net profit from investment gains.

Among them, China Construction Bank led the industry, achieving an investment return of 49.1 billion yuan last year, a year-on-year increase of 129%. The bank stated that this was mainly due to increased gains from bond investments and equity investment disposals.

Coincidentally, several state-owned banks attributed the significant growth in investment returns to the improvement in bond investment income, with five banks realizing gains from bond sales, leading to substantial increases in related income. Postal Savings Bank of China (PSBC) posted a year-on-year increase of 540%, with bond disposal gains exceeding 19.5 billion yuan.

Industry insiders told “Huaxia Times” that, affected by the continuous narrowing of the net interest margin, banks relying solely on scale expansion can no longer support profit growth, and the traditional profit model of “money making money” through deposit and loan interest spreads has clearly weakened. Therefore, banks are actively adjusting their business strategies, expanding non-interest income sources through bond and other investments, which also marks a shift in the industry’s profit model from “interest spread dominance” to “multi-faceted driving.”

Investment income contributes over 14% to the net profits of the six major banks

Against the backdrop of continued narrowing of interest spreads and pressure on fee-based businesses, the market’s focus on banks’ investment capabilities has increased. Financial indicators such as investment income and fair value changes have become important windows to observe banks’ comprehensive competitiveness.

The “Huaxia Times” reporter noted that in 2025, the investment returns of the six major state-owned banks generally achieved positive growth, with an average increase exceeding 46%, significantly boosting bank profits.

Looking at the growth in investment income, China Construction Bank recorded the highest increase at 129.18%, followed by Industrial and Commercial Bank of China (ICBC) with 54.6%. In terms of absolute investment income, ICBC led with 63.29B yuan, followed by Bank of China, which achieved 53.3B yuan in investment income last year.

Reviewing the financial reports, it is not hard to see that this is largely attributable to bond investments.

According to relevant accounting standards, banks classify bond investments into three categories based on “business model” and “contractual cash flow characteristics”: financial assets measured at amortized cost (AC), financial assets measured at fair value through other comprehensive income (FVOCI), and financial assets measured at fair value through profit or loss (FVTPL).

Among these, AC accounts are generally categorized under “investment income.” Typically, they are the bank’s bond holdings intended to be held to maturity for stable coupon income, not for frequent trading profits. However, industry insiders also point out that AC accounts are not entirely immovable. “When banks need to increase current profits, selling bonds in AC accounts is a common method—because the sale price difference is directly recorded as investment income, which can immediately boost profits.”

The reporter observed that the financial reports showed that in 2025, several state-owned banks’ AC account gains surged.

Specifically, the gains from the termination of amortized cost financial assets for Postal Savings Bank, ICBC, China Construction Bank, Bank of Communications, Agricultural Bank of China, and Bank of China increased by 539.93%, 452.03%, 340.82%, 300.88%, 219.63%, and 77.51% year-on-year, respectively.

However, as the hot bond market in 2024 cooled in 2025, with increased volatility in the bond trading market, it became more difficult for bond trading desks to realize excess returns, directly affecting the data of the FVTPL accounts. This account, along with gains from precious metals, derivatives, investment real estate, etc., is grouped under “fair value change gains,” which, together with “investment income,” are listed under “non-interest income.”

According to disclosures, in 2025, only Agricultural Bank of China’s fair value change gains achieved double-digit growth, increasing by 23.09% to 9.84B yuan.

It is worth noting that the reporter’s statistics show that, if only considering the investment income item, its contribution to the net profits of the six major banks has exceeded 14%, with Postal Savings Bank of China performing the best, with investment income accounting for 50.8% of its net profit.

Amid the continued contribution of substantial income from investment activities, will the banking industry’s profit model undergo structural adjustments in the future?

In this regard, Wu Zewei, a special researcher at Sichuan Commercial Bank, told “Huaxia Times” that the current reliance of banks on the traditional logic of “money making money” through deposit and loan interest spreads has not been overturned, but its dominance has clearly weakened. The fundamental reason is that the net interest margin continues to narrow to historic lows, making it difficult to support profit growth through scale expansion alone. Meanwhile, the importance of non-interest income sources such as bond investments and trading financial assets has significantly increased. Some state-owned banks have flexibly adjusted bond holdings and realized gains, making substantial contributions to the parent company’s net profit. This indicates that the bank’s profit model is shifting from “interest spread dominance” to “multi-faceted driving.”

Luo Feipeng, a researcher at China Postal Savings Bank, also told “Huaxia Times” that the continuous expansion of non-interest income reflects a transformation from reliance on single interest spread income to a diversified income structure. However, he emphasized that credit business remains the bank’s core and a key risk management platform.

Increasing bond investments

As an important allocation force in China’s bond market, banks currently hold more than half of the total market share of bonds.

A report from Huayuan Securities Research Institute shows that in 2025, the bond market will mainly rely on increased allocations by banks’ proprietary trading. Data indicates that in the first 11 months of 2025, the balance of China’s bond market increased by 19.7 trillion yuan. Meanwhile, from the investment side, proprietary bond investments by banks in the first 11 months increased by 14.3 trillion yuan, exceeding the total increase for all of 2024, accounting for 72.7% of the bond market expansion during the same period.

Several state-owned banks also stated in their financial reports that in 2025, they actively expanded bond investments, increasing holdings of government bonds such as treasury bonds and local government bonds. According to disclosures, by the end of 2025, the bond investment proportions in financial investments for Agricultural Bank of China, ICBC, China Construction Bank, Bank of Communications, and Postal Savings Bank of China were 98.3%, 96.5%, 96.38%, 90.46%, and 79.78%, respectively.

Banks’ spontaneous bond trading not only enhances current profits but also plays a stabilizing role in the bond market.

Previously, authoritative figures pointed out that when bond yields are relatively high compared to loan interest rates and bond prices are low, banks tend to buy bonds to stabilize the market; conversely, when bond yields are low and prices high, selling bonds can realize profits and help maintain the bank’s sustainable support for the real economy.

However, considering the current overall low-interest-rate and high-volatility market environment, how should banks balance asset allocation and build a more stable and sustainable investment profit model in the future?

Wu Zewei believes that banks should establish a “dynamic balance” asset allocation system. First, they need to improve interest rate judgment capabilities, flexibly adjust bond durations and positions amid market fluctuations, extend durations during downturns to lock in yields, and control risk exposure during increased volatility. Second, maintain reasonable credit deployment, focusing on key areas of the real economy such as inclusive finance, green finance, and technological innovation, while enhancing risk pricing and customer management capabilities. Additionally, banks should vigorously develop wealth management, investment banking, and transaction banking businesses with lighter capital requirements to increase non-interest income. Through multi-asset and multi-strategy coordinated allocation, they can balance returns and risks, forming a more stable and sustainable profit model.

Luo Feipeng also stated that for banks, the key is to establish a dynamic asset allocation mechanism, flexibly adjusting asset proportions based on economic cycles and interest rate environments, strengthening asset-liability management, and improving overall risk-return ratios, thereby achieving diversified income sources, risk dispersion, and sustainable profitability.

He also emphasized that in response to external environment changes, banks should focus their credit deployment on key areas of the real economy and improve risk pricing capabilities. In bond investments, they need to strengthen duration management and interest rate risk hedging to avoid over-reliance on trading gains; meanwhile, expand middle-office businesses such as wealth management, investment banking, and custodial services.

Editor: Feng Yingzi Chief Editor: Zhang Zhiwei