CITIC Bank is aiming to position payment and settlement services at the forefront of its client engagement model. This marks a shift from the traditional approach where banking relationships are typically initiated through credit facilities and lending.
In its earlier "Five Leadership" strategy from 2024, the bank had already outlined its ambition to build a "leading transaction settlement bank." Now, with the arrival of the new "Three-Three Strategy" in 2026, payment settlement, cross-border services, and digital intelligence are recognized as three key leadership capabilities, standing alongside the three main business lines of wealth management, comprehensive financing, and investment trading. This strategic arrangement suggests CITIC Bank is attempting to reorder the sequence of how it builds corporate client relationships.
In traditional corporate banking, the bank typically establishes a relationship first through credit, financing, and other integrated services, and then seeks to win the client's settlement business, such as payments for goods, payroll, and daily receipts and payments. CITIC Bank now aims to move settlement to the front of this process, making payment and cash management services the initial entry point for establishing corporate relationships.
The most tangible outcome so far is the continued expansion of its transaction settlement volume. In the first half of 2026, CITIC Bank's total transaction settlement amount reached 106.42 trillion yuan, a year-on-year increase of 14.94%. While the scale of transactions processed through its accounts and settlement systems is growing, the bank's financial report does not yet clearly indicate whether these transactions are generating stable deposit balances. As of the end of June, the bank's corporate demand deposits had decreased by 1.36% compared to the beginning of the year, while corporate time deposits increased by 8.83%.
It's important to note that transaction settlement figures represent cumulative flow over the half-year, while deposit balances are a snapshot of stock at a specific point in time. These two metrics cannot be directly used to calculate a conversion rate. Nonetheless, the rapidly growing settlement scale has not yet translated into a clear increase in corporate demand deposits by the end of June. A more fundamental question is where these settlement relationships originate. The current public data does not reveal how much of the 106.42 trillion yuan settlement volume comes from pre-existing credit clients versus clients acquired through payment and cash management services before any credit relationship was established.
This strategic shift is happening at a time when CITIC Bank's traditional growth model is under pressure. With loan yields continuing to decline and retail risks not yet fully digested, relying on credit expansion to drive revenue is increasingly challenged by capital consumption and diminishing returns. The 106.42 trillion yuan figure demonstrates the scale of business, but it does not yet prove that CITIC Bank has fundamentally changed how it acquires corporate clients. To truly assess the value of this strategy, one must observe three key conversions: from payment and cash management services to primary settlement relationships, from transaction flow to low-cost deposits, and from settlement clients to comprehensive financial income.
Growth Constraints
The attempt to reposition client engagement is directly linked to the constraints facing the traditional growth model. Between the first half of 2021 and the first half of 2026, the bank's total assets grew from 7.82 trillion yuan to 10.38 trillion yuan, an increase of nearly one-third. However, during the same period, its operating income only rose from 105.592 billion yuan to 109.408 billion yuan, an increase of only about 3.6%. Asset size continues to expand, but revenue is not growing at a corresponding pace. Pricing pressure on the asset side is ongoing. In the first half of 2026, the yield on interest-earning assets fell by 36 basis points year-on-year. At the same time, retail assets that typically generate higher yields, such as consumer loans and credit cards, are being actively reduced.
The risk in the retail portfolio is also still being absorbed. As of the end of June, the non-performing loan (NPL) ratio for personal consumer loans had risen from 2.66% to 3.31%. These changes on the asset side have already impacted the net interest margin and interest income. In the first half, CITIC Bank reported a net interest margin of 1.62%, which was up by 1 basis point from the first quarter but still below the 1.63% recorded for the full year of 2025. The cost of customer deposits fell by 41 basis points year-on-year to 1.24%, and this reduction in liability costs helped offset some of the repricing pressure on the asset side.
While the net interest margin stabilized temporarily in the second quarter, the growth in net interest income is still primarily driven by scale expansion. In the first half, net interest income increased by 1.948 billion yuan, with volume growth contributing 1.675 billion yuan and interest rate factors contributing 273 million yuan. The loan structure is also adjusting. Corporate loans grew by 6.52% compared to the start of the year, while personal loans decreased by 1.53%, showing a further tilt towards the corporate sector. As with the settlement figures, the corporate loan and transaction settlement amounts are bank-wide aggregated data and do not specify whether they come from the same customers. The data available cannot distinguish how much of the settlement scale is from existing credit clients versus those acquired through payment services first.
Loan expansion requires significant capital. With returns on assets declining, CITIC Bank needs to seek low-cost liabilities and capital-light income beyond simply expanding its loan book. Payment and settlement services have thus become a key strategic pillar.
Can Settlement Lead the Way?
If payment settlement is to move to the front of client engagement, CITIC Bank must first answer a crucial question: why would a corporate client choose to place its primary settlement relationship with this bank? It is common for companies to use multiple banks. Having transactions flow through an account does not necessarily mean the bank is part of the client's main cash flow cycle. Only when a company's frequent payments, such as for goods, payroll, and daily working capital, consistently flow through the account and generate a stable average daily deposit balance, can settlement services deliver low-cost deposits and help the bank identify new financing needs. Increasing transaction volume is just the first step. Whether funds can be retained as stable deposits is what will determine if the settlement business can improve the bank's liability structure.
Zhao Yuanxin, Vice President of CITIC Bank, has summarized the liability strategy as "increasing settlement and controlling high prices." The "controlling high prices" part relies on reducing high-cost time deposits and adjusting deposit tenors and pricing, which can improve liability costs relatively quickly. The "increasing settlement" part, however, requires embedding the bank into the client's daily operations to ensure regular receipts and payments flow through the account, building a stable average daily balance. The former can be driven by pricing and asset-liability management, but the latter depends on whether the bank can secure the client's primary settlement relationship.
Management has disclosed that in the first half of the year, the corporate demand deposit ratio reached 44%, ranking in the top two among joint-stock banks, while the retail demand deposit ratio was 27%, up 0.4 percentage points from the start of the year. However, the public transcript does not clarify whether these ratios are based on average daily balances or period-end figures, nor does it fully disclose the calculation denominator. The mid-year report does confirm that as of the end of June, corporate demand deposits fell by 1.36% from the beginning of the year, while corporate time deposits grew by 8.83%.
The management's disclosed deposit ratios and the mid-year end-of-period balances may use different methodologies and cannot be directly compared. Similarly, the cumulative transaction settlement amount of 106.42 trillion yuan cannot be used to calculate a conversion rate with the end-of-period deposit balance. The conclusions that can be drawn are still limited: CITIC Bank's payment settlement volume has clearly grown, but the public data does not yet prove this growth has translated into increased corporate demand deposits.
A consultant specializing in corporate banking research commented to NSI that merely looking at transaction volume is insufficient to judge whether settlement business is retaining funds. The bank must also track where the money ultimately flows, following the client's capital chain to see if upstream and downstream clients also maintain their banking relationships with the same institution. Compared to cumulative transaction amounts, fund retention rates and average daily balances are better indicators of actual deposit outcomes. "To further judge whether the liability structure is improving, one also needs to observe the average daily balance of corporate settlement deposits, the number of new settlement clients and their average deposits, the retention rate of settlement funds, and where the funds go after high-cost time deposits are reduced," the consultant added.
Conversion Yet to Be Proven
Even if low-cost deposits are secured, payment settlement must answer another question: can these client relationships be further converted into comprehensive financial income? Under the "Three-Three Strategy" business portfolio, CITIC Bank hopes to use payment settlement to enter the client's business scenario and then extend the relationship to wealth management, comprehensive financing, and investment trading. Whether a corporate client, after completing payments through CITIC Bank, goes on to use cash management, cross-border settlement, financing, custody, or wealth management services will determine if settlement can evolve from transaction volume into comprehensive income. A settlement relationship does not automatically translate into a comprehensive financial relationship.
Large enterprises typically use multiple banks and may distribute credit, settlement, custody, and investment trading services among different institutions. Gaining the payments gateway does not guarantee securing the client's future financing and investment trading businesses. The consultant noted, "If the bank doesn't have deep industry knowledge and its digital systems aren't up to scratch, the transaction data it holds will be hard to convert into specific products and business." For CITIC Bank, whether payment settlement can continue to generate financing and investment trading income will depend on how well its products, data, and client scenarios are connected. From the public data, this step is not yet clear.
In the first half, the bank's net fee and commission income grew by 2.41% year-on-year, a slower pace than its operating income. However, the public data does not break down how much financing, cross-border, custody, or investment trading revenue was generated by settlement clients. A continuous, observable data chain linking transaction settlement scale, low-cost deposits, and comprehensive service income has not yet been established. Zeng Gang, Deputy Director of the National Institution for Finance & Development, pointed out that for transaction banking to extend to comprehensive finance, it needs to break down silos between transaction banking, corporate business, and international business units, and establish an assessment mechanism suited to asset-light, low-risk, and full-industry-chain coverage.
The conversion of client relationships into revenue is not just a front-end acquisition issue; it also depends on the bank's internal coordination and resource allocation. Hu Gang, Executive Director and Vice President of CITIC Bank, has proposed that over the next five years, the investment trading segment should strive to contribute more than one-third of the bank's total revenue. To achieve this, alongside seizing market opportunities, CITIC Bank will need to convert the client relationships established through payment settlement into demand for agency services, custody, market-making, and asset allocation. Capital constraints add urgency to this conversion.
As of the end of June, CITIC Bank's core Tier 1 capital adequacy ratio stood at 9.37%, down 0.11 percentage points from the beginning of the year. Loan expansion continuously consumes capital. Payment settlement, cash management, and wealth services are relatively capital-light; if they can generate stable deposits and service income, the bank will secure income and return sources beyond balance sheet expansion.
To evaluate the effectiveness of this strategy, four categories of indicators should be monitored: the proportion of new settlement clients that are non-borrowers (i.e., those obtained before credit relationships) or where settlement precedes credit; the average daily balance of corporate settlement deposits; the cross-selling rate of comprehensive products to new settlement clients; and income from settlement clearing, cash management, and cross-border settlement.
CITIC Bank has already achieved a payment settlement scale exceeding one hundred trillion yuan. The next step is to answer whether these transactions can create stable primary settlement relationships, and whether those can further convert into low-cost deposits and comprehensive financial income.