ICBC’s risk diversification supports resilience amidst China’s slowdown

Capitalization should be sufficient despite ICBC not being included in the first round of the government’s capital injection.

The Industrial and Commercial Bank of China Ltd.'s (ICBC) robust risk diversification will continue to support its credit strengths, allowing the bank to remain resilient amid China's economic slowdown, said S&P Global Ratings.

The credit ratings agency expects its nonperforming asset ratio to be steady at 4.5%-4.8% in 2025-2026, with credit loss provisions at 0.6%-0.7%.

“We believe ICBC's capitalization provides [a] sufficient buffer against external economic uncertainties. This is even though the bank is not included in the government's first round of capital injection,” S&P said.

In September 2024, China announced its capital injection plan of a reported RMB1t for megabanks. It announced on 30 March 2025 that about RMB500b of this amount will be allocated to four Chinese megabanks.

Despite the bank's exposure to vulnerable sectors, it reported broadly stable nonperforming loan (NPL) and special mention loan ratios of 1.34% and 2.02%, respectively, at the end of 2024.

ICBC's ratio of credit loss provisions to average loans was 0.46%, down slightly from 0.61% in 2023. These factors mitigated margin pressure, keeping return on average assets at 0.78%, above the sector average of 0.63%, S&P said.

However, its retail NPL ratio rose to 1.15% in 2024 from 0.7% in 2023.

“We attribute the rise in the retail NPL ratio to a subdued employment outlook in China. This pushed up bad debt in non-mortgage retail loans such as credit cards and personal consumption loans,” S&P said.

Property development loans accounted for a manageable 3.11% of ICBC's total loans at end-2024, whilst credit cards and personal consumption loans accounted for 2.73% and 1.48%, respectively.

At end-2024, ICBC's NPL ratio for its property development exposure stood at 4.99%, lower than the 5.37% a year earlier, and higher than the 1.58% for corporate loans.

S&P projects ICBC's risk-adjusted capital ratio to be 7.9% in 2026, excluding any potential capital injection in subsequent rounds.