As the banking sector's interim earnings season reaches its peak this week, investors are closely monitoring net interest margin trajectories, the destination of maturing time deposits, the implications of K-shaped divergence, and asset quality trends amid a shifting operational landscape. On August 27, China Citic Bank Corporation Limited (601998) hosted its 2026 interim results conference, where its management team addressed these pressing concerns in detail.

This marks the first earnings presentation for President Lü Tiangui, following the formal approval of his appointment in June. "Previously, we prioritized interest margin as a leading indicator. Now, we are increasingly seeking a balance between margin preservation and risk management, enabling us to make more confident and proactive asset allocation and structural adjustments while preemptively managing future credit costs," Lü stated. He emphasized that profit growth in today's environment cannot rely solely on cost-cutting, but must be driven by revenue expansion through a dual engine of stable net interest margins and rising fee income. Looking ahead, the bank aims to navigate cyclical uncertainties with steadfast strategic resolve.

According to financial disclosures released on the evening of August 26, China Citic Bank recorded operating revenue of RMB 109.408 billion in the first half, up 3.05% year-on-year. Net profit attributable to shareholders rose 3.08% to RMB 37.602 billion. Net interest income increased 2.74% to RMB 73.149 billion, while non-interest income grew 3.69% to RMB 36.259 billion.

Strategies for Stabilizing Interest Margins and Boosting Revenue

Data from the National Financial Regulatory Administration and bank reports indicate a clear stabilization signal for interest margins in the first half. China Citic Bank's net interest margin (NIM) stood at 1.62% for the period, up 1 basis point (bp) quarter-on-quarter and down 1 bp year-on-year. Over the past four quarters, the bank's NIM has remained range-bound at 1.64%, 1.62%, 1.61%, and 1.62%.

Lü attributed this stability to disciplined liability cost management and sustained growth in transaction and settlement businesses. "We have continuously refined our payment and settlement product systems and ecosystem scenarios, leading to steady production capacity release. Our liability cost ratio fell to 1.37% in the first half, down 24 bps from year-end 2025 and a cumulative decline of 92 bps compared to end-2020. Our corporate deposit cost advantage over the peer average widened to 20 bps, and the average daily balance share of corporate demand deposits ranked among the top two joint-stock banks. Retail demand deposit share also improved from last year, thickening our cost safety cushion," he explained.

Vice President Zhao Yuanxin noted that China Citic Bank's NIM remains at the forefront among peers in absolute terms, with a significantly narrowed decline on a year-over-year basis. Last year, the full-year NIM contraction was 14 bps. He broke down the first-half drivers into price and structural factors: price effects dragged NIM by approximately 2.6 bps, primarily due to falling loan yields and the bank's deliberate adjustment of retail lending product strategies, including stricter underwriting for certain high-yield credit loans. This resulted in a 33 bp decline in loan yields. However, the bank offset this through aggressive deposit cost reduction, with the deposit cost ratio falling 27 bps. On the structural front, the share of general-purpose loans rose by 1.2 percentage points, contributing a 1.1 bp improvement to NIM.

Looking to the asset side, Zhao emphasized continued structural optimization, while on the liability side, the bank is pursuing dual tactics of expanding settlement balances and curbing high-cost deposits. As of mid-2026, corporate demand deposits accounted for 44% of total deposits, ranking second among joint-stock banks, while retail demand deposits rose 0.4 percentage points from the start of the year to 27%. The bank has intensified efforts to match high-cost deposits with low-cost settlement funds, implemented tiered management for three-year deposit clients, and proactively lowered rates on structured deposits. Combined, these two categories now represent 30% of deposits, down 2 percentage points from the beginning of the year, significantly aiding deposit cost reduction.

For the second half, Zhao cautioned: "The banking industry may still face some pressure on interest margins. On the liability side, the primary factor this year has been the concentrated maturity of high-cost three-year deposits, particularly in the first half. However, the scope for further declines is limited, and as this round of deposit maturities winds down, its impact on NIM will diminish. On the asset side, loan yields continue to face downward pressure due to refinancing at lower rates, early repayments, and repricing of existing loans."

Future Approach: Dual-Ended Active Management

Looking ahead, Zhao outlined a strategy of enhanced proactive management across both sides of the balance sheet. On the asset side, the bank will further optimize its broad asset structure, increase general-purpose lending, and raise the proportion of medium-to-long-term loans, using duration extension to mitigate yield compression. On the liability side, it will promote stable growth of low-cost settlement deposits to expand the scope for cost reduction. The bank will prioritize advancing its strategy as a leading payment and settlement bank, deepening system development and customer engagement to unlock production capacity and solidify its low-cost funding base.

Diversifying revenue streams through enhanced business synergy is a key industry trend. Vice President Hu Gang, discussing the bank's five-year outlook, stated that China Citic Bank is pushing forward with financial market business reforms, aiming for investment and trading segments to contribute over one-third of total revenue within five years. The goal is to establish a leading position in market making, trading, custody, and asset management within the domestic banking industry.

High Retention Rates for Maturing 3-Year Deposits

Entering 2026, the narrative of "deposit migration" has intensified amid a wave of maturing fixed deposits. Vice President Xie Zhibin reported at the earnings conference that the renewal rate for three-year time deposits and the AUM retention rate in the first half remained broadly in line with 2025 levels, showing no new trend shifts. In an environment of falling rates and heightened market volatility, stable deposits continue to serve as the core anchor for household wealth allocation.

However, structural changes in household asset allocation are evident. Xie highlighted two key features: first, the ongoing migration of wealth from real estate to financial assets, underscoring the clear growth potential of the wealth management industry; second, rising market volatility has led to a "K-shaped" divergence in client risk appetites, amplifying the need for differentiated services.

"In this context, the wealth management track should remain favorable long-term. In a sense, it's a blue ocean, but it could also turn into a red ocean," Xie said. He noted that China Citic Bank capitalized on its strengths in the first half, achieving record retail AUM growth. "On a comparable basis, our year-to-date AUM balance increased by over RMB 250 billion, an additional RMB 38.7 billion compared to the same period last year. Among the seven comparable joint-stock banks, only two achieved year-on-year AUM growth, with ours ranking first in incremental terms. By end-July, China Citic Bank was the only joint-stock bank with positive year-on-year growth in retail AUM."

Xie added that fee income from wealth management and private banking grew 21% year-on-year in the first half. The bank's affluent and VIP client base surpassed 5 million households, while private banking clients exceeded 100,000, reaching 105,000, with the highest annual increase in recent years.

In the first half, China Citic Bank reported net fee and commission income of RMB 17.230 billion, up 2.41% year-on-year, accounting for 15.75% of operating revenue. Breakdown of fee components showed: agency business fees rose 31.66% (RMB 980 million increase), custody and other entrusted business fees grew 5.76% (RMB 110 million increase), while settlement and clearing fees fell 8.67%, wealth management fees declined 5.94%, guarantee and advisory fees dropped 11.23%, and bank card fees decreased 7.83%.

Separately, financial data showed that as of end-June, CIB Wealth Management's product management scale rose 8.63% from end-2025 to RMB 2.49 trillion, elevating it to second place in the industry. Equity-linked products under management reached RMB 637.904 billion, an increase of RMB 300.443 billion from the start of the year, with their share of new products expanding from 14.70% to 25.57%.