CITIC Bank's 106 trillion yuan "settlement transformation" test

CITIC Bank hopes to bring payment and settlement to the forefront of customer management.

As early as 2024, in its "Five Leading" strategy, the bank proposed to build a "leading transaction settlement bank". After entering the new round of "Three-Three Strategy" in 2026, payment settlement and cross-border services, digitalization and intelligence were listed as three leading capabilities, on par with the three major business directions of wealth management, comprehensive financing and investment and trading.

Judging from this strategic arrangement, CITIC Bank is attempting to adjust the order of its customer management.

In traditional corporate banking, banks often first establish relationships with corporate clients through credit lines, financing, and other comprehensive services, and then strive to secure settlement business such as payments for goods, salaries, and daily receipts and payments.

CITIC Bank now hopes to move the settlement process forward, so that payment and cash management services can also become an entry point for building customer relationships.

What we can see at present is that the scale of transaction settlement continues to grow.

In the first half of 2026, CITIC Bank's transaction settlement amount reached RMB 106.42 trillion, a year-on-year increase of 14.94%.

The volume of transactions recorded in CITIC Bank's accounts and settlement system is expanding, but whether these transactions have resulted in a stable accumulation of funds remains unclear, as the financial statements provide an unanswered question.

As of the end of June, the bank's corporate demand deposits decreased by 1.36% compared to the beginning of the year, while corporate time deposits increased by 8.83%.

The transaction settlement amount is the cumulative flow over six months, while the deposit balance records the ending balance of funds. These two figures cannot be directly used to calculate the conversion rate. However, the rapidly growing settlement scale has not yet resulted in a clear increase in corporate demand deposits by the end of June.

A more fundamental question is, where do these settlement relationships come from?

The publicly available data does not disclose how much of the 106.42 trillion yuan settlement amount came from existing credit clients and how much came from payment and cash management services before the credit relationship was established.

This attempt comes at a time when CITIC Bank's traditional growth model is under pressure. Loan yields continue to decline, retail risks have not been fully digested, and continuing to rely on credit expansion to drive revenue also faces pressure from capital consumption and declining returns.

The 106.42 trillion yuan figure demonstrates the scale of the business, but it does not prove that CITIC Bank has changed the way it acquires corporate clients.

To examine the actual value of this strategy, three transformations need to be observed: from payment and cash management services to primary settlement relationships, from transaction volume to low-cost deposits, and from settlement clients to comprehensive financial revenue.

Growth constraints

CITIC Bank's attempt to adjust the starting point of its customer management is related to the constraints faced by its traditional growth model.

From the interim report of 2021 to the interim report of 2026, the bank's total assets increased from RMB 7.82 trillion to RMB 10.38 trillion, an increase of nearly one-third; during the same period, operating income increased from RMB 105.592 billion to RMB 109.408 billion, an increase of only about 3.6%.

The asset size continued to expand, but revenue did not grow in tandem.

Pricing pressure on the asset side continues. In the first half of 2026, the yield on interest-earning assets of CITIC Bank decreased by 36 basis points year-on-year; and retail assets with relatively high yields, such as consumer loans and credit cards, are being actively reduced.

As of the end of June, the bank's non-performing loan ratio for personal consumer loans rose from 2.66% to 3.31%, indicating that retail risks are still being digested.

Changes on the asset side have already been reflected in net interest margin and interest income.

In the first half of the year, CITIC Bank's net interest margin was 1.62%, up 1 basis point from the first quarter, but still lower than the 1.63% projected for the whole of 2025. The cost of customer deposits decreased by 41 basis points year-on-year to 1.24%, with the decline in liability costs offsetting some of the repricing pressure on the asset side.

Net interest margin stabilized temporarily in the second quarter, but the growth in net interest income still mainly relied on scale expansion. In the first half of the year, CITIC Bank's net interest income increased by RMB 1.948 billion, of which RMB 1.675 billion came from scale growth and RMB 273 million from interest rate factors.

The loan structure is also being adjusted accordingly. CITIC Bank's corporate loans increased by 6.52% compared to the beginning of the year, while personal loans decreased by 1.53%, with the loan structure further shifting towards the corporate sector.

The corporate loan and transaction settlement amounts are all aggregated data from across the bank, making it impossible to confirm whether they originated from the same group of customers. Of the aforementioned settlement amounts, it is impossible to distinguish how many came from existing credit clients and how many were generated before the credit relationship was established through payment and cash management services.

Loan expansion will continue to tie up capital. With declining asset yields, CITIC Bank needs to find low-cost liabilities and low-capital income sources in addition to expanding its loan portfolio.

Payment and settlement thus become an important fulcrum.

Can settlement be made in advance?

For payment and settlement to reach the front end of customer operations, CITIC Bank first needs to answer the question: Why are companies willing to place their main settlement relationships here?

It's not uncommon for businesses to use multiple banks simultaneously. The presence of transactions in an account does not necessarily mean that the bank has entered the customer's main cash flow.

Only when a company's recurring income and expenditure, such as payments for goods, salaries, and daily working capital, are continuously processed through its accounts, and a certain amount of daily cash accumulation is formed, can payment and settlement bring low-cost deposits to banks and help banks identify new financing needs.

Increasing transaction volume is only the first step. Whether funds can be stably accumulated determines whether settlement operations can improve the liability structure.

Zhao Yuanxin, vice president of CITIC Bank, summarized the debt strategy as "increasing settlement and controlling high prices".

"Controlling high prices" mainly relies on reducing high-cost time deposits, adjusting deposit terms and pricing, which can quickly improve liability costs; "increasing settlement" requires getting involved in customers' daily operations, allowing more recurring income and expenditure to pass through accounts, and forming a stable daily average fund accumulation.

The former can be advanced through pricing and asset-liability management, while the latter depends on whether the bank can secure the customer's primary settlement relationships.

According to CITIC Bank's management, in the first half of the year, the bank's corporate demand deposits accounted for 44% of its total deposits, ranking among the top two among joint-stock banks; retail demand deposits accounted for 27%, an increase of 0.4 percentage points from the beginning of the year.

However, the existing public shorthand records do not clearly specify whether the proportion of corporate demand deposits is based on daily averages or period-end figures, nor do they fully disclose the denominator used in the calculation.

The interim report confirms that as of the end of June, CITIC Bank's corporate demand deposits decreased by 1.36% compared to the beginning of the year, while corporate time deposits increased by 8.83%.

The percentage of demand deposits disclosed by management may use different metrics than the balance at the end of the interim report, and therefore cannot be directly compared. The cumulative transaction settlement amount of 106.42 trillion yuan also cannot be converted into a conversion rate with the ending deposit balance.

The conclusions that can be drawn at present are still limited: CITIC Bank's payment and settlement scale has increased significantly, but publicly available data cannot yet prove that this increase has translated into an increase in corporate demand deposits.

A consultant who has long studied corporate banking told Hub that judging whether settlement transactions have retained funds cannot be done solely by looking at the transaction amount. Banks also need to follow the flow of customers' funds to see where the money ultimately went and whether upstream and downstream customers also kept it with the bank.

Compared to cumulative transaction amount, fund retention rate and average daily balance are closer to the actual results of fund accumulation.

"To further determine whether the liability structure has improved, it is also necessary to observe the average daily balance of corporate settlement deposits, the number of new settlement customers and the average deposit per customer, the settlement fund retention rate, and the destination of customer funds after the reduction of high-cost time deposits," the person pointed out.

The conversion still needs to be verified.

Even if low-cost deposits are generated, payment and settlement still need to answer another question: can customer relationships be further transformed into comprehensive financial revenue?

Looking at the business portfolio of the "three-three strategy", CITIC Bank hopes to enter the customer management scenario with payment and settlement, and then extend customer relationships to wealth management, comprehensive financing and investment transactions.

Whether a company uses cash management, cross-border settlement, financing, custody, or wealth management services after completing payment or receipt with CITIC Bank determines whether payment and settlement can transform from transaction volume into comprehensive revenue.

Settlement relationships are not inherently equivalent to comprehensive financial relationships.

Large enterprises often use multiple banks simultaneously and may distribute credit lines, settlements, custody, and investment transactions to different institutions. Gaining access to payment and collection channels does not guarantee a bank will secure subsequent financing and investment business from its clients.

The aforementioned consultant pointed out: "If banks do not understand the industry well enough and their digital systems cannot keep up, it will be difficult to turn the transaction data in their hands into specific products and services."

For CITIC Bank, whether payment and settlement can continue to generate revenue from financing and investment transactions depends on whether its products, data, and customer scenarios can be integrated.

Based on publicly available data, this step is still unclear.

In the first half of the year, CITIC Bank's net fee and commission income increased by 2.41% year-on-year, a growth rate lower than that of operating income during the same period. However, the publicly available data did not further disclose how much revenue from financing, cross-border, custody, and investment transactions was generated by payment and settlement customers.

There is no publicly available data chain that can be continuously observed for transaction settlement volume, low-cost deposits, and integrated service revenue.

Zeng Gang, deputy director of the National Institution for Finance and Development, pointed out that for transaction banking to extend into comprehensive finance, it is necessary to integrate transaction banking, corporate business, international business and other lines, and establish an assessment mechanism that is compatible with light assets, low risk and full industry chain coverage.

Whether customer relationships can be converted into revenue is not just a matter of front-end customer acquisition, but also depends on the bank's internal coordination and resource allocation.

Hu Gang, executive director and vice president of CITIC Bank, stated that the bank aims to increase the revenue contribution of its investment and trading sector to more than one-third of the total revenue over the next five years.

To increase the revenue contribution of this segment, in addition to seizing market opportunities, CITIC Bank also needs to transform the customer relationships formed by payment and settlement into customer service, custody, market making and asset allocation needs.

Capital constraints have increased the urgency of this transformation.

As of the end of June, CITIC Bank's core tier 1 capital adequacy ratio was 9.37%, a decrease of 0.11 percentage points from the beginning of the year.

Loan expansion requires continuous capital commitment. Payment and settlement, cash management and wealth management services are relatively capital-light, and if they can generate stable deposit and service income, CITIC Bank will gain income and return sources beyond balance sheet expansion.

To assess the effectiveness of this strategy, four indicators need to be observed: the proportion of new settlement customers without loans, and the proportion of customers who settle accounts before receiving credit; the average daily balance of corporate settlement deposits; the overall product penetration rate of new settlement customers; and settlement and clearing, cash management, and cross-border settlement revenue.

CITIC Bank has already made payments and settlements exceeding 100 trillion yuan.

The next question is whether these transactions can lead to stable primary settlement relationships and further translate into low-cost deposits and comprehensive financial income.

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