China”s banking sector is showing signs of improvement, but the recovery remains uneven, with widening performance gaps among banks, according to McKinsey & Company.
Some key operating indicators improved in the first half of 2026. In the second quarter, commercial banks’ net interest margin rose to around 1.41 percent quarter-on-quarter, marking the first quarterly increase since 2022.
At the same time, performance diverged further across different types of banks, with large commercial banks, joint-stock banks, city commercial banks and rural commercial banks recording varying rates of profit growth. Among listed banks, the gap in net profit growth between the fastest- and slowest-growing institutions reached approximately 42 percentage points in the first half, underscoring that the sector’s improvement is far from a broad-based recovery, McKinsey said.
“Rather than simply asking whether the industry has fully stabilized, it is more important to focus on how the growth model of China’s banking sector is changing,” said Nicole Zhou, a senior partner at McKinsey and leader of the company’s Financial Institutions Group Practice in China.
“Going forward, competition will be less about scale and increasingly about the ability to create value. China has a vast customer base, deep pools of savings and globally leading digital capabilities. These strengths give Chinese banks an opportunity to pursue a development path that differs from those of European and US markets.”
Banks that can effectively combine technology, customer insights, wealth management and international services will be better positioned to compete in the next phase of the industry’s development, Zhou said.
China’s wealth management market is also entering a new stage as household wealth grows and consumers’ asset-allocation needs evolve.
McKinsey estimates that China’s total household financial assets rose from 114 trillion yuan ($17 trillion) in 2015 to 326 trillion yuan in 2025. At the same time, households have continued to shift part of their financial assets away from traditional bank deposits, deepening the trend commonly referred to as the “deposit migration”.
Some leading banks reported year-on-year growth of close to 30 percent in wealth management fee income in the first half, suggesting that demand for diversified wealth allocation remains strong.
“Chinese households are continuing to accumulate wealth, while their asset-allocation strategies are becoming increasingly diversified,” said Ben Ma, a partner at McKinsey. “Customers are no longer looking simply for individual financial products. They increasingly need integrated wealth solutions tailored to different stages of life, risk appetites and family objectives.”
Meanwhile, artificial intelligence is transforming how customers obtain financial information, receive advice and access banking services. But whether AI can fundamentally reshape the banking industry will depend on the ability of banks to move beyond isolated experiments and translate pilot projects into value at scale, McKinsey said.
For Chinese banks, the potential of AI extends well beyond improving the efficiency of individual employees or processes. It could fundamentally reshape how banks engage with customers, deliver wealth management services and operate their businesses.
Banks should therefore deploy AI against clearly defined business objectives and focus on translating technology investments into tangible improvements in customer experience and operational efficiency, while maintaining appropriate risk controls. Ultimately, the institutions that succeed in turning AI capabilities into sustainable business value will be better positioned to build long-term competitiveness, McKinsey said.
jiangxueqing@chinadaily.com.cn
