The gap between Agricultural Bank of China Limited and Industrial and Commercial Bank of China Limited continues to narrow.

On September 4th, capital markets witnessed a historic moment. At market close, Agricultural Bank of China Limited achieved a total market capitalization of 2.55 trillion yuan, surpassing Industrial and Commercial Bank of China Limited's 2.49 trillion yuan to become the new "universe bank." However, this position lasted only one day before ICBC reclaimed the top spot.

Looking at performance this year, Agricultural Bank of China Limited's A-shares have surged over 35%, while Industrial and Commercial Bank of China Limited recorded only a 7.5% gain. Taking a longer view from the banking sector's recovery starting in 2023, Agricultural Bank of China Limited has risen approximately 1.5 times, significantly outperforming Industrial and Commercial Bank of China Limited's roughly 70% gain.

As value investing pioneer Ben Graham once said: "In the short run, the market is a voting machine, but in the long run, it is a weighing machine."

From current fundamentals perspective, Industrial and Commercial Bank of China Limited leads Agricultural Bank of China Limited in scale metrics. Regarding dividend strategies favored by capital in recent years, ICBC currently offers higher dividend yields than ABC (based on interim reports, ICBC's pre-tax annualized yield is approximately 3.8% versus ABC's 3.28%).

Given Industrial and Commercial Bank of China Limited's current advantages, what expectations does capital have for Agricultural Bank of China Limited, and can ABC secure this throne?

**The Gap Continues to Narrow**

As of June 2025, Industrial and Commercial Bank of China Limited, the previous "universe bank," maintained total assets of 52.32 trillion yuan, continuing to lead the banking industry. Agricultural Bank of China Limited's total assets reached 46.86 trillion yuan, approximately 89.56% of ICBC's scale.

In the first half of 2025, Industrial and Commercial Bank of China Limited recorded total revenue of 427.092 billion yuan and net profit of 167.716 billion yuan. Agricultural Bank of China Limited's corresponding figures represented 86.62% and 83.11% of ICBC's performance respectively.

While snapshots reflect current status, historical trends show Agricultural Bank of China Limited consistently closing the gap with Industrial and Commercial Bank of China Limited.

From 2020 to the first half of 2025, Agricultural Bank of China Limited's asset scale ratio versus Industrial and Commercial Bank of China Limited improved from 81.59% to 89.56%, operating revenue ratio increased from 74.54% to 86.62%, and net profit ratio rose from 68.92% to 83.11%.

How did Agricultural Bank of China Limited catch up?

The two banks have different positioning: Industrial and Commercial Bank of China Limited focuses on "industry" and "commerce," while Agricultural Bank of China Limited targets "agriculture." Due to different positioning, they carry different missions and execute different strategies - ICBC emphasizes commercial and international business, while ABC has been busy "sinking" into lower-tier markets in recent years.

In overseas business scale, ICBC generated revenue of 126.676 billion yuan in 2020 versus ABC's 44.5 billion yuan. By the first half of 2025, ICBC's overseas revenue was 56.252 billion yuan compared to ABC's 16.497 billion yuan. In international markets, ICBC's scale significantly exceeds ABC's with the gap slightly widening, though both banks' overseas operations have contracted.

By business segments, Industrial and Commercial Bank of China Limited's revenue across all business lines in 2024 fell below 2020 levels, with total revenue declining for three consecutive years from 2022 to 2024. Agricultural Bank of China Limited fared little better, with 2024 total revenue still below 2021 levels. Urban finance revenue declined continuously from 2022 to 2024, though county-level growth compensated for losses. As ABC continues its "sinking" strategy, county-level finance's revenue contribution rose from 39.62% in 2020 to 49.4%.

Therefore, Agricultural Bank of China Limited's pursuit of Industrial and Commercial Bank of China Limited stems from positioning and strategic differences. ICBC competes globally while ABC captures market share in lower-tier markets.

Additionally, the vast lower-tier market has driven rapid growth in Agricultural Bank of China Limited's retail business. In 2020, ABC's personal banking revenue was 74% of ICBC's, but after overtaking in 2023, the gap continues widening. As of June 2025, ABC's retail deposits and loans slightly exceed ICBC's, indicating ICBC needs to strengthen its retail efforts.

**Agricultural Bank of China Limited Has Room to Maneuver, Industrial and Commercial Bank of China Limited Has Stronger Foundations**

Despite Agricultural Bank of China Limited's consistent pursuit of Industrial and Commercial Bank of China Limited in recent years, its scale remains below ICBC's, as does profitability. While ABC shows scale effects in narrowing gaps from assets to revenue to net profit, using 89.56% of ICBC's asset scale to generate only 83.11% of its net profit raises questions about further scale efficiency releases.

In the first half of 2025, Agricultural Bank of China Limited's asset scale ratio versus Industrial and Commercial Bank of China Limited increased 0.99 percentage points, but revenue ratio improved only 0.16 percentage points. The profit ratio gap narrowed significantly, superficially due to ICBC's profit decline while ABC maintained growth, but this closely relates to their respective foundations and represents core expectation differences.

Comparing core income statement items reveals Industrial and Commercial Bank of China Limited had higher revenue growth than Agricultural Bank of China Limited in the first half, but ultimately showed revenue growth with profit decline due to credit impairment losses. ICBC provisioned an additional 2.198 billion yuan while ABC reduced provisions by 3.043 billion yuan. This difference stems from varying asset quality and risk coverage capabilities: as of June 2025, ICBC's NPL ratio was 1.33%, 0.05 percentage points higher than ABC's; ICBC's provision coverage ratio was 217.71% versus ABC's 295%. Due to different asset conditions, ICBC has been increasing provision coverage in recent years while ABC enjoys greater maneuvering room.

While profits can be managed, revenue requires genuine capability and foundation. For Agricultural Bank of China Limited to become the substantial "universe bank," it must close the approximately 15% revenue gap with Industrial and Commercial Bank of China Limited, requiring ABC's future revenue growth to outpace ICBC's. However, ABC's recent expansion through "sinking" has squeezed regional banks' survival space, particularly small and medium agricultural and commercial banks, with intensifying internal competition making sustainability uncertain.

For banks, revenue growth depends on business expansion, which requires capital support. In terms of foundation, Industrial and Commercial Bank of China Limited's capital adequacy ratio, Tier 1 capital ratio, and core Tier 1 capital ratio all exceed Agricultural Bank of China Limited's. Without additional capital, ABC faces greater growth constraints than ICBC. Surpassing ICBC in revenue will not be easy for ABC.

In summary, Agricultural Bank of China Limited's market capitalization overtaking Industrial and Commercial Bank of China Limited represents a "contest" between reality and expectations. While ABC has indeed been closing gaps across multiple scale metrics in recent years, significant disparities remain. The market's optimistic "front-loading" reflects typical behavior. In reality, ICBC still outperforms ABC, and ABC's expectation of truly surpassing ICBC is not easily achievable.