Industrial Bank: Reshaping Through Painful Transformation
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For Industrial Bank, the report card for 2025 carries no miracles, only the painful pruning and reshaping brought about by stock competition.
Reflected in the surface layer of the financial report, the bank's core indicators show a steady trend: annual operating income of 212.741 billion yuan, net profit attributable to the parent company of 77.469 billion yuan, with year-on-year growth rates of only a marginal 0.24% and 0.34%, respectively.
The capital market, accustomed to high growth, can easily misinterpret this performance as passive flat-lining amid an economic winter, but at the recently concluded earnings briefing, faced with narrowing net interest margins and asset scarcity, management conveyed a resolve to transcend economic cycles.
Chairman Lü Jiajin stated bluntly that Industrial Bank now holds a “dual value of profitability and defensiveness.”
To smooth market expectations during this painful transformation, Industrial Bank issued a cash dividend of 31.02%. Meanwhile, under a defensive tone, its asset portfolio of 11.09 trillion yuan continued its deep-level reshuffling beneath the surface.
This reshuffling sketches out a systematic reconstruction—and to see through Industrial Bank’s current fundamentals, three clues must be clarified:
First, the marginal profit increase reflects real asset clearance. Legacy burdens such as real estate and local government investments are being accelerated and recognized.
Second, hundreds of billions in credit funds are exiting the old cycle and shifting toward trillion-scale new foundations in technology and green sectors.
Third, with the launch of the AIC license and the building up of a digital-intelligent foundation, Industrial Bank is attempting to break the traditional banking narrative of “living off net interest margin.”
A summary from Lü Jiajin serves as a footnote to this proactive reform: "We persist in doing what is difficult but right, seizing the old triad cycle of real estate, infrastructure, and finance, and transforming toward a new triad cycle."
For today's Industrial Bank, the deep advance into science and digitalization is no longer a tactical patch-up, but a fundamental logic reconstruction.
Defending the Bottom Line on the Balance Sheet
As an inevitable path for fundamental restructuring, the profit base of Industrial Bank is being tested.
In 2025, against the backdrop of continued LPR cuts and a macro “asset shortage,” Industrial Bank’s asset-side yield inevitably faced an overall decline:
The average yield on interest-earning assets for the year was 3.24%, down 48 basis points year-on-year; average yield on corporate and personal loans and advances was 3.59%, down 61 basis points.
However, this did not seriously impact the bank’s income—in 2025, net interest income still achieved a positive growth of 0.44%, reaching 148.752 billion yuan.
Supporting this marginal increase was effective cost reduction on the liability side and the "compensating quantity for price" strategy.
On one hand, Industrial Bank exercised strict liability control on the deposit side: the interest paid rate for commercial deposits dropped 34 basis points to 1.59%, and retail deposits dropped 31 basis points to 1.80%.
Through strengthening network construction and settlement deposit accumulation, the bank maintained its basic position in the race for low-cost funds. Although the net interest margin further narrowed by 11 basis points to 1.71%, it still exceeded the average for joint-stock banks by 15 basis points.
On the other hand, expanding interest-bearing assets directly offset the shrinking net interest margin: total asset size surged by 5.58% to 11.09 trillion yuan, achieving “compensating quantity for price.”
The hub notes that as asset size expanded, Industrial Bank’s underlying risk indicators remained within the normal range. At the end of 2025, the non-performing loan ratio was 1.08%, up just 0.01 percentage points from the previous year-end.
However, beneath the stable surface, risk exposure in specific areas showed localized intensification:
First, the corporate real estate non-performing loan ratio rose 0.45 percentage points to 4.34%;
Second, the non-performing loan ratio for local government financing platforms (“LGFV”) climbed 2.60 percentage points to 6.52%.
The rise in these two core indicators essentially constitutes defensive asset clearance.
Under the macro cycle of deep property adjustment and local debt reduction, Industrial Bank chose to proactively reclassify and provision for property-related projects and weaker local government debts that are difficult to restore in the short term, using existing provisioning resources and profit space to truthfully recognize and digest historical burdens.
As of the end of 2025, the bank's real estate financing and LGFV debts were reduced by 53.293 billion yuan and 46.643 billion yuan respectively. The decline in these figures indicates the bank is consciously unwinding from its highly dependent “property-infrastructure” old cycle.
To digest the pain of cutting high-yield assets and clearing historical burdens, the consumption of provisions became a necessary cost—the provisioning coverage ratio fell from 237.78% to 228.41% by the end of 2025.
Notably, as it accelerated the clearing of the balance sheet, the management still delivered over 30% in cash dividends.
The logic behind this set of moves is clear and determined: by “compensating quantity for price” and cutting costs, stabilize the bottom line profit; then, by issuing high proportional cash dividends, signal to the capital market that legacy risks are being actively digested and core profitability remains fundamentally intact.
For a large commercial bank with 11 trillion yuan in assets, relying solely on defense is clearly not a path toward the future.
When hundreds of billions in credit funds exit the assets of the old cycle, how to find a new home has become Industrial Bank’s next challenge.
How to Reduce the Old, Expand the New
The new home may lie within the lending needs of emerging industries.
In 2025, Industrial Bank’s overall loan growth for the year was 3.70%. Yet beneath the steady surface, credit resources are clearly tilting toward policy-driven sectors in the real economy.
By year-end, the bank's outstanding loans in technology finance reached 1.12 trillion yuan, with a year-on-year growth of 18.47%. Green finance loan balances reached 1.11 trillion yuan, with a year-on-year growth rate of 19.05%.
Both new tracks’ loan balances exceeded a trillion yuan and maintained high growth of nearly 20%.
Such differentiated growth reflects the switching of the credit base: amidst weak traditional credit demand, Industrial Bank is anchoring its balance sheet growth engine in new energy, new materials, high-end equipment manufacturing, and semiconductor technology tracks.
But the flip side is that switching tracks inevitably brings “acclimatization” issues in risk control logic.
Previously, banks lending to real estate or traditional manufacturing focused on tangible collateral like land and plants. This heavy asset risk control logic of “looking at the bricks” often fails with asset-light, R&D-intensive tech enterprises.
To bridge the risk control gap, Industrial Bank comprehensively upgraded its “tech flow” evaluation system:
This system no longer relies solely on collateral but turns intangible assets such as R&D investment, patent counts, core technical teams into credit evaluation criteria. In 2025, the bank approved financing exceeding 1.15 trillion yuan based on this “tech flow” system.
From “looking at bricks” to “looking at patents,” the restructuring of the underlying risk control logic has become the institutional foundation supporting the growth of tech loans and helped the bank adjust its credit structure even as overall growth slows.
However, replacing traditional property-related assets with 1.12 trillion yuan in tech loans solves the “quantity” and “directional” asset issues but cannot easily bridge the “price” gap.
In the current loan market, quality tech enterprises are fiercely contested among peers. Lending rates to large tech SOEs or industry leaders have been compressed so much that at times they even invert deposit costs; meanwhile, for small or start-up tech companies, they naturally carry high market risk.
This means the overall yield of tech loans falls short of previous real estate financing.
With net interest margin down to just 1.71%, relying solely on the traditional model of “loan interest income” faces a profit ceiling. As Deputy General Manager Zeng Xiaoyang said at the earnings briefing, small and start-up tech companies hope more for capital support. If banks intervene only as creditors, they shoulder high early-stage risks but earn only limited fixed interest.
This imbalance of risk and reward is a common challenge for all banks seeking a tech finance transformation.
Faced with this commercial model bottleneck, how will Industrial Bank break through?
Digital Intelligence: Success or Failure
Internally, battle for survival space through digital intelligence to improve operational efficiency; externally, break the profit ceiling of single credit intermediary with comprehensive licensing. This is Industrial Bank’s dual-path answer.
In today’s stage of stock competition, the focus of technology investment has shifted from early-stage customer acquisition to substantive cost reduction and efficiency improvement.
In 2025, Industrial Bank invested 7.614 billion yuan in information technology, accounting for 3.58% of operating income; the bank has 8,245 technology staff, nearly 14% of the workforce.
At the earnings briefing, Chairman Lü Jiajin asserted digital intelligence transformation as a "life-or-death battle," and the returns on this massive investment are gradually offsetting risk and operational costs.
For example, intelligent risk control models manage the entire credit chain, improving effectiveness of managing vast dispersed assets; under macro pressure on retail asset quality, Industrial Bank kept retail NPL at a low 0.88%.
Another example: AI applied in customer service, programming, and operations in the back-office has curbed expansion of hard operating costs. Under the premise of marginal revenue growth, the bank’s cost-to-income ratio stayed stable at 29.56% for the year.
However, the massive tech investment has not yet immediately reversed the overall downward trend in effectiveness.
Over the past three years, the bank's ROE (weighted return on net assets) fell from 10.64% to 9.15%. Revenue per capita dropped from 3.1671 million yuan to 3.0849 million yuan, and profit per capita from 1.1584 million to 1.1233 million yuan.
In 2025, all three key data points continued their downward trajectory.
This means that relying on digital intelligence for profit management stabilized the basic position, but truly achieving productivity leap across the bank still has a long way to go.
AIC License Breaks the Wall
If digital intelligence is the operating foundation for the present, then the landing of the Asset Investment Company (AIC) license is Industrial Bank's long-term bet for the future.
With national ministries further expanding equity investment pilots, policy channels for commercial banks to participate in tech VC are opened. Industrial Bank became the first joint-stock commercial bank approved to establish an AIC.
By the end of 2025, Industrial Bank's wholly owned subsidiary Xingyin Investment had steadily developed, with 6.808 billion yuan deployed during the reporting period.
The essence of the AIC license is to grant commercial banks legitimate qualifications to directly engage in equity investment.
Deputy General Manager Zeng Xiaoyang emphasized at the briefing that AIC’s establishment is not simply a license supplement but a key variable for high-quality development of tech finance. Through equity investment, banks can become growth partners for enterprises.
The founding of Xingyin Investment enables internal coordination between “equity and debt” within Industrial Bank.
Through the AIC platform, Industrial Bank can further "invest early, small, for the long term, and in hard tech”; the "commercial bank + investment bank" architecture gives the bank a chance to share equity premium as enterprises go public.
However, given the initial capital of tens of billions and an initial investment scale of 6.8 billion, AIC has yet to stir big waves in the net profit pool of 77.4 billion. Whether this model will bring substantial non-interest income growth in the next cycle remains to be seen.
Looking back at Industrial Bank’s 2025, there was no miraculous counter-trend surge, only realistic choices under objective conditions.
This asset migration will inevitably be accompanied by growing pains, but for a giant ship, being able to steadily replace underlying momentum amid the storm may prove more decisive for its true coordinates in the next cycle than maintaining high visible growth.
Risk Warning and DisclaimerThe market has risks; investment requires caution. This article does not constitute personal investment advice, nor does it take into account the special investment objectives, financial circumstances, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article suit their own situation. Investing based on this is at your own risk. ```