China’s six largest banks have posted first-quarter reports with a significant drop in both earnings and profits.
Experts said the profit drop in China’s banking industry indicates a stalling economy that is likely to continue to worsen as the effects of the tariff war between China and the United States kick in.
The six Chinese major banks, which are all state-owned—Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, and China Postal Savings Bank—released their first-quarter data on April 29. Taken together, their net profit attributable to parent companies fell by 7.3 billion yuan ($1 billion) compared with the same period in 2024—a decrease of about 2 percent.
Among them, Industrial and Commercial Bank of China (ICBC), the world’s largest lender by assets, saw a 4 percent net profit drop year-over-year. The Bank of China posted a 2.9 percent decrease from the year before.
The six banks reported a total revenue of 910.2 billion yuan ($125 billion) in the first quarter, a year-over-year decrease of 13.9 billion yuan ($1.9 billion).
ICBC is the only major Chinese bank with a single-quarter revenue of more than 200 billion yuan ($27.5 billion), although this still represented a 3.2 percent decrease from the same period in 2024.
China Construction Bank reported revenue of 190.07 billion yuan ($26.1 billion), falling by 5.4 percent year-over-year.
“In the first quarter of 2025, the global economy lacked strong growth momentum,” China Construction Bank said in its report.
Since January, China and the United States have been engaged in a tariff war that has hit China’s exports hard, worsening the Chinese economy, which had already been in a lasting slowdown.
Chinese media cited multiple agencies’ analyses, attributing the banking sector’s profit drop to a number of reasons: concentrated loan repricing that exacerbated interest rate spread pressure, a slowdown in the pace of asset expansion, an increase in the income tax rate, weakened support from provisioning, and increased volatility in non-interest income.
Henry Wu, a Taiwanese macroeconomist, told The Epoch Times on May 2 that mainland Chinese companies have stopped receiving export orders as a direct result of the tariff war, “and China’s economy and macro-economy have fallen into recession.”
“In this case, the banks’ business [is] certainly affected,“ Wu said. ”Originally, the purpose of bank lending was to earn interest rate differentials, but now, the demand for funds may shrink sharply. Many companies dare not invest anymore and may have to close or even go bankrupt. Therefore, the banks’ business has shrunk due to the tariff war. And this has had an impact on the macroeconomy.”
Taiwanese economist Edward Huang said that the tariff war will have a greater impact on Chinese banks’ profits in the second quarter.
“[The drop in the first quarter is] because China’s real estate has continued to decline, the entire economy is in a downturn, which has a greater impact on China’s banks’ profits. It is because of domestic factors,” he said.
After the Chinese banks posted shrinking profits, their shares slumped.
Huang said that bank profits and stocks indicate whether a country’s economy is good or bad, because banks transfer funds to all sectors in a country.
“If the profits of the systems that transfer funds decline, then it means that economic activity is slowing down, and it is an all-around slowdown,” he said.
Meanwhile, China’s purchasing managers’ index (PMI) for its manufacturing sector fell to 49 in April, hitting a 16-month low, as the Trump administration’s hefty new tariffs on Chinese goods took effect.
PMI is an indicator of the prevailing direction of economic trends in the manufacturing and service sectors. A reading lower than 50 indicates economic contraction.
Huang anticipates that China’s exports will further decline in the second quarter and that the Chinese economy will continue stalling.
“As for how serious the stalling is after the tariff war, we can probably see a clue by observing the profits of Chinese banks in the second quarter,” he said.
Huang also predicts that China’s ruling Chinese Communist Party may take actions such as lowering interest rates and reserve requirement ratios to cope with the economic slowdown.
“For ordinary people, they will see a reduction in their bank interest, and for banks, the profit spread will be reduced,” Huang said.
Given the economic situation, Wu said that “banks may not dare to lend money for fear of default, and the banks’ credit will begin to shrink, which will cause the macro-economy to further cool and deteriorate.”
When the banks don’t lend money, “many companies are unable to repay their previous loans, and then they default on their loans,” he said.
