Three Paths for "Lightweight" Transformation in the Banking Industry

In the fiercely competitive new energy vehicle industry today, a repeatedly discussed “impossible triangle” persists—

Automakers try to maximize range, minimize energy consumption, and maximize safety, but the three often constrain each other: maximizing range increases battery weight, strictly controlling energy consumption requires a lighter vehicle, while safety demands strict requirements for body strength.

The industry consensus is that the key to breaking this deadlock is whole-car lightweighting.

By optimizing body structure, adopting lightweight materials such as high-strength steel and aluminum alloys, and integrating the layout of battery, motor, and control systems, automakers can reduce vehicle weight without sacrificing safety, thereby improving energy efficiency and extending range, truly achieving “breaking the stalemate with lightness,” and finding a balance point among these three goals.

This logic is now providing an excellent reference for high-quality development in the banking industry.

At a critical stage of a cyclical shift, the banking sector faces its own “impossible triangle”: scale expansion, risk control, and sufficient capital are difficult to balance.

Pursuing scale expansion often requires deploying more high-risk weighted assets, increasing capital consumption; strict risk control leads to credit contraction, dragging down growth; maintaining sufficient capital levels limits asset expansion flexibility and profit margins.

Against this background, asset lightweighting is also the key for commercial banks to break the “impossible triangle”:

By reducing high-risk weighted credit and non-standard assets, increasing high-quality low-risk bonds and cash assets, optimizing asset structure and risk density, the banking sector hopes to achieve a dynamic balance of “steady scale growth, risk reduction, and sufficient capital.”

In financial statements, the core data measuring a bank’s “lightness” mainly appears in two dimensions:

One is the ability to generate revenue without consuming capital, the other is fund utilization efficiency under unit capital constraints.

Previously, industry relied on retail expansion, but as customer acquisition costs climb and asset quality fluctuates, it’s harder to replicate. “Paper thin” achieved by allocating more low-risk, low-yield assets exposes the problem of low capital returns.

When simple asset redeployment no longer works, the focus shifts to deep restructuring of the balance sheet.

Now, there are three bank lightweight transformation paths emerging:

First is the retail model pioneered by China Merchants Bank, mainly leveraging wealth management as a pivot, mobilizing low-cost demand deposits, building a moat around fund costs and capital efficiency;

Second, in the context where retail is struggling, is a return to corporate banking, focusing on the industrial client base, using enterprise transaction management and comprehensive services to replace the traditional capital-intensive spread game;

Third is crossing traditional business lines, using AI models and algorithms, reshaping risk pricing, and systematically substituting for labor and capital consumption.

These three paths are not isolated, but are interlocked components of a systemic project:

Retail with continuing importance has shifted from extensive expansion to intensive cultivation, corporate banking becomes the pivot for stable profits and light asset exploration, and technology penetrates deeply into processes, enabling precise risk insight and effective capital saving.

Today’s lightweight banks no longer merely compete on balance sheet numbers but seek to break the contradiction between scale expansion and capital consumption, truly achieving a virtuous cycle of capital growth driven by endogenous profits.

Retail Benchmark

In the banking industry's transformation toward lightweighting, China Merchants Bank is an indispensable benchmark.

In 2025, China Merchants Bank’s ability to generate revenue without consuming capital, and fund utilization efficiency both remain ahead of peers.

The indicator reflecting the first capability is the proportion of intermediary business income after removing market volatility factors (note: net fee and commission income / (operating income - fair value fluctuation income - investment income - exchange gain));

After stripping away non-interest income affected by bond market and other fluctuations, the fee proportion directly shows the bank’s genuine ability to generate intermediary income solely through service and without relying on capital consumption.

Calculation shows that after removing fair value fluctuations and other capital gains, China Merchants Bank’s fee and commission income ratio will reach as high as 24.62% in 2025;

This figure is far ahead of peers, with Ping An Bank and China CITIC Bank at 21.23% and 18.09% respectively, and most joint-stock banks still below 15%.

The indicator representing the second capability is Return on Risk-Weighted Assets (RoRWA) (note: net profit attributable to shareholders / risk-weighted assets);

This directly measures the profit gained per unit of risk-weighted asset, reflecting capital utilization efficiency.

In 2025, China Merchants Bank's RoRWA will reach 1.99%, while peers average 0.6% to 0.9%. This means, with equal core capital consumption, China Merchants Bank creates more than twice the profit of most peers.

Supporting both leading revenue capability and capital efficiency is China Merchants Bank’s huge wealth management layout.

With industry-wide intermediary income under pressure, China Merchants Bank's 2025 wealth management fees and commissions will record 26.711 billion yuan, up 21.39% year-on-year; with agency fund income rising by 40.36% and wealth management income by 18.98%.

When customers make China Merchants Bank the main venue for wealth management, funds naturally migrate there:

In 2025, China Merchants Bank’s retail personal financial assets (AUM) will reach 17.08 trillion yuan, up 14.4% year-on-year;

In contrast, China CITIC Bank, whose total assets are about 0.9 times that of China Merchants Bank, has retail AUM of only 5.36 trillion yuan, less than one third of China Merchants Bank's.

This vast wealth management ecosystem ultimately results in enormous low-cost demand funds, underpinning its high capital efficiency;

During the asset-side downturn cycle, the low average cost rate of interest-bearing liabilities at 1.26% helps China Merchants Bank maintain a high net interest margin (NIM) of 1.87%, holding first place among joint-stock banks.

This shows the financial appeal of the cycle in which wealth management income and low-cost funds reinforce each other.

Over the past years, the industry has crossed resources in attempts to replicate this high-frequency, low-cost fund accumulation model.

But now, it is extremely difficult to replicate the "CMB model"—

President Wang Liang of CMB points out that retail credit growth in the banking sector is facing a “cliff-like decline”, and asset quality pressure is still being released.

As macro cycles transmit pressure to retail asset quality industry-wide, risks from credit card and consumer loan NPL volatility intensify, and the path relying solely on retail credit expansion hits obstacles;

Without a large and sticky C-end customer base, spending heavily to acquire traffic in a stock market means high customer acquisition costs can quickly eat up current profits.

When retail breakthrough is blocked, bank transformation will inevitably delve deeper into the balance sheet.

Transformation Unfinished

The China Merchants Bank example cannot hide the industry’s collective anxiety.

In banking regulation, not all assets consume the same amount of capital—a high-risk micro loan may need 100% capital provisioning, while a high-credit government bond may need none;

If total assets expand but risk-weighted assets (RWA) grow more slowly, it means the bank is reducing high-capital business and shifting to capital-saving areas.

Tracking these indicators, analysis finds most banks’ 2025 lightweighting transformation is not only slow but even somewhat regressive.

Taking joint-stock banks as an example, except for Zhejiang Commercial Bank, all others’ total asset growth lags behind RWA growth; Shanghai Pudong Development Bank lags by 4.97 percentage points, Ping An Bank and China CITIC Bank by 2.44 and 2.43 percentage points respectively.

This reflects the banking sector’s defensive posture—

Though the wealth management market brings positives, slowed scale growth means it cannot fill the revenue gap in the short term, so most banks revert to relying on credit deployment, pushing RWA density up.

Even for Zhejiang Commercial Bank, apparent progress in lightweighting is actually just a statistical shift rather than genuine improvement in fund utilization efficiency.

In 2025, Zhejiang Commercial Bank’s total asset growth outpaces RWA growth, achieving apparent capital reduction on paper.

But breaking down profit structure, its pure fee and commission income ratio is only 7.45%, near the bottom among peers, with a mediocre RoRWA of 0.61%. Both intermediary income and fund efficiency are not impressive.

The balance sheet has successfully become lighter, so why is capital efficiency still thin?

Because in 2025, Zhejiang Commercial Bank greatly increased allocation of low-risk, low-yield interbank deposits and other financial institution funds—with asset growth of interbank placements outpacing credit growth by nearly 38 percentage points.

On paper, this seems to achieve “deleveraging,” but it actually just shifts assets to lighter categories—not truly more profitable, just less capital-consuming.

Such passive asset expansion is mainly to optimize regulatory indicators or seek industry arbitrage.

But the downside of sacrificing asset return for lightweight scale is:

Funds simply circulate within the financial industry, disconnected from the real economy, failing to generate intermediary income from settlement or wealth management;

If macro interest rates reverse, bond market volatility erases fair value gains from bond investments, and low-margin asset structures face direct profit stall risk.

When the wealth management path stalls and simple asset shifting fails, banks growing heavier still need to find a more sustainable lightweight solution.

Corporate Banking Focus

From the balance sheet perspective, returning to corporate banking is the trend in the sector.

In 2025, the nine joint-stock banks listed on the A-share market had a cumulative retail loan balance of 15.97 trillion yuan, down 0.83% from the year-end and falling by 1.36 percentage points year-on-year;

Meanwhile, corporate loan balance totaled 23.57 trillion yuan, up 10.07% from year-end, with an increase of 1.15 percentage points.

However, credit returning to corporate banking does not mean abandoning lightweighting;

With retail dividend exhausted, many corporate banking strongholds are now returning to their resource base, refocusing on lightweight corporate business reconstruction.

For these institutions, focusing on industry chains and transaction finance may be more realistic than forced retail transformation.

Dong Ximiao, deputy director of Shanghai Financial and Development Lab, suggests that simply sticking to or abandoning “retail first” is not wise.

Dong Ximiao believes that for most banks, a pragmatic strategy is: use the stable profits of well-managed corporate banking as the foundation to provide time and resources for strengthening retail, ultimately achieving a virtuous dual-wheel drive.

The breakthrough core is shifting from asset-scale spread to service fee-based earnings.

China CITIC Bank chairman Fang Heying notes that the future focus of competition is switching from “credit intermediary” to “service intermediary,” striving for leadership in comprehensive financing and transaction settlement.

Becoming the credit engine for corporate transaction ecosystems is CITIC Bank’s core path to lightweight corporate banking.

Leveraging a base of 1,388,100 corporate clients, CITIC Bank no longer individually assesses every small supplier, but uses products like “Xin e chain” to bind to the core companies’ credit.

In 2025, CITIC Bank’s assets exceed 10 trillion yuan, with loan growth at 2.48%, well below total asset growth at 6.28%, largely filled via increased allocation to interbank assets and financial investments, similar to Zhejiang Commercial Bank.

But financial data shows its investment growth is 11.67%, with focus shifting to more liquid FICC (fixed income, foreign exchange, commodities) business;

This is not simple low-yield asset hoarding, but uses FICC’s market-making and trading functions to absorb enterprise liquidity, interacting with transactional banking.

In 2025, transaction settlement volume grows 16.30% year-on-year. The massive settlement fund accumulation effectively reduces reliance on high-capital credit.

Service-driven expansion proves efficient: that year, RoRWA stands at 0.92%, a relatively high level among peers.

Shanghai Pudong Development Bank focuses on enterprise treasury services.

By promoting Beidou treasury management systems, SPDB embeds financial services in daily payment and settlement of group enterprises.

In 2025, SPDB targets five directions: technology, supply chain, inclusive finance, cross-border, and treasury. High-frequency transaction fields contribute nearly 70% of incremental corporate loans.

By managing corporate cash flow, SPDB records 68.579 billion yuan in net corporate operating income, gaining stable non-interest returns while reducing market spread dependency.

Industrial Bank acts as a broker for capital.

Switching from lending itself to helping others raise money, Industrial Bank uses bond underwriting and asset securitization to turn loan quota-free business into intermediary income.

In 2025, Industrial Bank’s net fee and commission income reaches 25.891 billion yuan, up 7.45% year-on-year, far higher than its traditional loan interest income growth of 0.44%;

The ability to earn brokerage fees highlights its advantage in green finance and infrastructure projects.

Observation shows that although the three paths differ, their commonality is clear: trying to provide services and manage transaction flows to replace traditional spread business across generations.

From financial results, such lightweight paths substantially enhance intermediary income coverage over capital consumption.

After corporate business achieves lightweight high turnover, vast settlement funds not only hedge against narrowing spreads, but also naturally feed back into retail via channels like payroll.

However, lightweighting assets and revenue is just the first step.

The massive physical network, department setup, and staffing sustaining this complex business system require an efficiency revolution as well.

Underlying Base Revolution

During periods of industry-wide pressure, true lightweight operations have evolved beyond accounting reallocation into systematic replacement of heavy capital models via organization, process, and algorithm.

Technological infrastructure beneath the reports is one detail determining weight reduction success.

Analysis reveals banks’ technology investment logic is shifting from expense to capital efficiency item:

In 2025, 13 national banks will cumulatively invest 183.878 billion yuan in tech, with an average revenue ratio around 4.5%; among them, China Everbright Bank leads peers with a 7.17% ratio, while Industrial Bank’s tech staff ratio reaches a high 13.88%.

R&D spending is highly targeted: acquiring new productivity.

When banks can no longer reap dividends through branch expansion, restructuring staff and operating efficiency via technological leverage becomes a generational way to offset labor and capital consumption;

China Everbright Bank VP Yang Bingbing emphasizes that current tech investment must focus on computing power, algorithms, and data, ensuring every yuan is spent where it counts, directly serving business quality development and efficiency improvement.

Algorithmic risk control directly frees up capital space.

Using AI and large models to price risks precisely, banks effectively reduce inefficient capital provisioning for risk-weighted assets, freeing up capital locked for risk defense;

For example, Ping An Bank reports that by integrating satellite communications, IoT, and AI to monitor production dynamically, specific scenarios’ NPL rates are now below industry average.

With data becoming a factor, data is shifting from IT maintenance cost to strategic asset that can be certified and valued.

With accounting rules implemented, data asset inclusion is moving from exploration to deployment. For example, SPDB builds a data asset catalog to explore value growth without capital consumption and open new credit dimensions.

After consolidating infrastructure, some banks even turn internal tech capacity into external products to expand revenue channels.

For example, Industrial Bank’s subsidiary shares mature risk control via SaaS; Zhejiang Commercial Bank productizes supply chain finance systems, earning licensing fees without using loan quotas.

Additionally, new technology directly linked to the physical world is eliminating post-loan management burdens arising from information asymmetry at the source.

Currently, CMB, SPDB, Ping An Bank have all deployed commercial satellite monitoring, using AI to identify crop growth or project progress—satellite imagery is replacing much manual site checking.

Compared to maintaining large credit teams on-site, digital sensing systems’ marginal operating cost is much lower than traditional manpower; satellite launches appear heavy asset investment but are structurally substituting long-term risk control costs.

When banks master real-time asset status and gain data-level certainty, they no longer need to provision excess premium compensation for unknown risks. Premium reduction and provision relief are the real burden reductions digital closed loops bring to the balance sheet.

Looking at the bank sector’s structural reshaping in 2025—whether intensive retail, corporate reconfiguration, or tech breakthrough—they ultimately converge on the same topic: the endogenous conversion capability of capital.

When services become intermediary income, tech becomes pricing power, and data becomes credit, the deadlock between scale and capital may be truly broken.

Dong Ximiao points out that joint-stock banks are undergoing a profound shift from scale expansion to value creation;

He stresses that the measure of transformation success lies in whether a bank, facing cyclical stress, can optimize income structure, improve capital efficiency, and lower liability cost to establish truly resilient growth.

Only by establishing an endogenous cycle of capital can true resilience be achieved—not just structural optimization on the balance sheet, but the deep confidence for a commercial organization to survive economic cycles.

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