Chinese bank loan growth to stay sluggish as retail confidence falters

Loan growth has slowed to between 3.8% to 8.8%, said Morningstar.

Chinese banks’ loan growth is expected to remain sluggish throughout 2026 as retail confidence remains weak, said Morningstar.

By end-March 2026, the loan growth of state-owned banks, city banks, and rural commercial banks slowed to between 6.2% to 8.8%. Joint stock banks’ loan growth is at 3.8%.

Amongst banks, Morningstar noted that ICBC, China Construction Bank, and the Agricultural Bank of China are anchored by low funding costs, above-peer operating efficiency, and extensive networks.

These helped the three banks fuel market share gains, Morningstar said.

The three banks also saw double-digit growth in retail loans and tech-driven enterprise loans, which represent 17% to 20% of total loans for state-owned banks compared to about 10% for most smaller banks, Morningstar said.

Assets held by China’s banking institutions rose 8% year-on-year (YoY) in Q1 2026, lifted by large commercial banks’ assets hitting double-digit growth, data from the National Financial Regulatory Administration (NFRA) of China showed.

Separately, Natixis Asia Research warned that capital weaknesses of Chinese banks are being masked by government support.

“Chinese banks no longer generate organic capital due to lower profitability and asset quality issues,” said Alicia Garcia Herrero, Natixis CIB chief economist for APAC & Middle East; and senior economist Gary Ng. “Without government help, the capital adequacy ratio would have fallen in 2024.”