Industry performance meeting discusses "deposit relocation": deposits may be lost, but funds and customers will not be lost

Ask AI · How can China Merchants Bank achieve “no customer funds leaving” through wealth management strategies?

21st Century Business Herald reporter Huang Zixiao Hong Kong coverage

On March 30, China Merchants Bank held its 2025 annual results conference in Hong Kong. Chairman Miao Jianmin, President Wang Liang, and Deputy Presidents Peng Jiewen and Xu Mingjie, along with Chief Information Officer Zhou Tianhong, attended on site.

Earlier, on March 27, China Merchants Bank disclosed its 2025 annual report. During the reporting period, it recorded operating income of CNY 337.53B, up 0.01% year over year, and net profit of CNY 150.18B, up 1.21% year over year. Total assets were CNY 13.07 trillion, up 7.56%. Net interest margin was 1.87%, down 0.11 percentage points. ROAA and ROAE were 1.19% and 13.44%, respectively, down 0.09 and 1.05 percentage points year over year.

Recently, attention has been drawn to an upcoming wave of deposit maturities. According to estimates by research institutions, in 2026, approximately CNY 50 trillion to CNY 70 trillion of term deposits are expected to mature, and some may flow into bank wealth management products, “fixed-income plus” (固收+), dividend insurance, and other products. With wealth management as a calling card, how will China Merchants Bank respond?

At the meeting, Deputy President Peng Jiewen, in answering a question from a reporter of 21st Century Business Herald about “deposit shifting,” said the bank hopes to achieve an effect of “deposits may be lost, but funds and customers will not be lost” by leveraging channels such as interbank business and subsidiaries.

As of the close on March 30, China Merchants Bank’s A-shares were at CNY 39.48, up 0.1%; its H-shares were at HKD 49.4, up 0.9%.

Peng Jiewen said, “‘Deposit shifting’ refers to the issue of term deposits maturing within the year being lost. It is necessary to analyze two factors: first, the maturity size; second, whether deposits are actually lost.

In this regard, he provided some qualitative views on operating conditions. China Merchants Bank’s term deposits maturing in 2025 are indeed slightly higher than in past years, but it is not an abnormal figure and remains within a normal range.

He said that what people care about more is that in the current low-interest-rate environment, when deposit interest rates cannot meet customers’ needs for returns, funds may flow elsewhere—for example, into the capital market, into stocks, or into wealth management products and public fund products that have been converted into such.

In response, Peng Jiewen has two interpretations of deposit outflows.

From the customer perspective, deposits might be lost, but customers would not. If deposits flow into wealth management products and public fund products, China Merchants Bank hopes to keep the funds within the bank’s own ecosystem through its services. Although they are no longer on-balance-sheet funds, they are still the bank’s customers’ funds—i.e., the concept of retail AUM that China Merchants Bank often emphasizes. Therefore, deposits may be lost, but customers will not be lost.

Data show that last year China Merchants Bank’s retail AUM surpassed CNY 17 trillion, up 14.44%.

From the funds perspective, deposits might be lost, but funds would not be lost. If deposits flow into the capital market, stocks would be settled and deposited with the exchange or third-party custodians. Such funds are treated as interbank demand deposits in the bank’s accounting. China Merchants Bank can, through services, allow funds to flow back to the bank’s ecosystem via interbank channels.

“Once this logic is made clear, deposit shifting won’t be scary.”

In this regard, Peng Jiewen proposed four areas of work.

First, to prevent deposits from being lost as much as possible—this is foundational work. Through service and product alignment, ensure deposits are not lost;

Second, if deposits are about to be lost, it will test the bank’s wealth management capabilities. It can rely on the capabilities of its subsidiaries such as CMB Wealth Management to enable funds to flow from deposits into products, and continue to remain within the bank’s ecosystem;

Third, further improve interbank services and promote funds flowing into the capital market to return to the bank’s ecosystem through interbank channels;

Fourth, deposit outflows are also an opportunity for market reshuffling. China Merchants Bank will leverage its core competitive strengths to further gain market share and attract more customers and inflows of funds.

Retail finance has a primary position at China Merchants Bank, and multiple senior executives highlighted it at the results conference.

Chairman Miao Jianmin further explained “a new start for retail” in his remarks. The core requirements focus on three points: improve the quality of assets, strengthen liabilities, and bring wealth management to a new level. In the future, the key breakthrough for retail business is wealth management.

The 2025 annual report shows that China Merchants Bank has 224 million retail customers, up 6.67% from the end of the previous year. Of this, customers of Jinkuixing (金葵花) and above were 5.9315 million, up 13.29% from the end of the previous year. Retail customer deposit balances were CNY 4.5 trillion, up 11.48%. Retail AUM surpassed CNY 17 trillion, up 14.44%.

China Merchants Bank’s retail transformation began in 2004. After more than two decades, it has achieved systemic advantages: both the retail business’s revenue and profit contribution ratios exceed 50%.

However, in recent years, the retail business has faced severe challenges. Wang Liang candidly noted that, due to the rapid decline in the growth rate of retail credit, and the fact that the credit card segment is also affected by market changes—including impacts from the wealth management business, such as fee reductions by fund distribution and insurance—what used to be an important segment in revenue composition has become a growth gap.

Against this backdrop, Wang Liang put forward three approaches for sustainable development of its business structure.

First, implement a balanced strategy across four major segments: retail finance, corporate finance, investment banking and financial markets, and asset management and wealth management.

Second, accelerate the “four transformations” covering internationalization, integration, differentiation, and digitization and intelligentization—especially for internationalization, including cross-border businesses, overseas businesses, and foreign exchange businesses.

Third, implement a regional development strategy. In the past, the three core cities that contributed more to profits were Beijing, Shanghai, and Shenzhen. The bank plans to transform these three cities into the three major core regions of the Yangtze River Delta, the Greater Bay Area in the Yangtze River Delta, and the Northern coast/region around the Bohai Sea.

“Deepen customer segmentation and classified management, and strive to become the lead bank and the bank of choice.” He further proposed a new slogan.

Regarding risks in the retail business, Deputy President and Chief Risk Officer Xu Mingjie said that currently, overall retail credit risks across the entire market are still in an upward period, and credit card assets are also under some pressure. The bank will continue to take proactive measures to strictly control risks.

In a low-interest-rate environment, returns of some better-performing products are squeezed, and risk resilience declines to some extent. In that regard, he said China Merchants Bank will continuously optimize its business structure, adhere to asset-backed businesses as the primary focus, strictly raise the entry standards for consumer and small business loans, and dynamically optimize the customer base structure. Meanwhile, it will continue to stick to early warning, early exposure, early resolution, and early handling, using an active approach to manage risks.

Last year, China Merchants Bank achieved credit card transaction volume of CNY 130.7k, down 7.62% year over year to CNY 500k. However, Wang Liang said he is willing to bear the decline in contribution to revenue share in order to better manage asset quality.

Forecast: Net interest margin in 2026 will continue to narrow

The annual report shows that in 2025 China Merchants Bank’s net interest margin was 1.87%, down 0.11 percentage points year over year, though the margin in the fourth quarter rebounded somewhat on a single-quarter basis.

Peng Jiewen said that looking at it quarter by quarter, China Merchants Bank’s net interest margin for the first three quarters last year was 1.91%, 1.86%, and 1.83%, respectively, with the fourth quarter rebounding to 1.86%. It shows two characteristics. First, the amount of net interest margin decline is narrowing. In the fourth quarter, it rose by 3 basis points according to the group-calculation caliber, and by 2 basis points according to the company-calculation caliber. This indicates that subsidiaries made contributions.

Second, China Merchants Bank has made a great deal of effort in the asset-liability structure—for example, by increasing the proportion of higher-yield assets as much as possible, and by reducing assets with lower bill-related returns.

Looking ahead to 2026, Peng Jiewen judges that net interest margin will continue to narrow.

The reasons include not only downward pressure on asset pricing due to insufficient asset demand, but also a technical factor: after the LPR rate cut in May last year, some loans had not completed repricing yet, which would accordingly pull down the yield on loans. This part is mainly scheduled to be completed in the first two quarters of this year.

As for the deposit side, the repricing from the interest rate cut will be distributed relatively evenly across the entire year. However, he also said that China Merchants Bank’s current account deposits account for about 50%, and current account interest rates are basically “as low as they can go” now; term deposit rates are also already low, so the room for further declines is very limited, and the contribution may be less.

He reiterated several targets for net interest margin in 2026, which are basically consistent with the wording from the past year.

First, achieve a smaller narrowing in the margin; second, stabilize net interest margin as soon as possible. The hope is that, under the condition that no major policy is introduced in the external environment, it can stabilize as much as possible in the second half; third, hope that the level of net interest margin will still remain market-leading.