As the 2026 interim reporting season draws to a close, China's six largest state-owned banks and nine A-share listed joint-stock banks have collectively unveiled a staggering "interest savings" exceeding 210 billion yuan. Despite an overall expansion in deposit scale, the release of deposit repricing dividends enabled these 15 institutions to reduce their interest expenses on customer deposits, bucking the upward trend in deposit volumes.
A closer look beyond the impressive aggregate figures reveals a growing divergence within the industry. Postal Savings Bank of China achieved a remarkably low deposit cost ratio of 0.98%, while China CITIC Bank and China Minsheng Bank led joint-stock peers in cost reduction. However, some lenders remain constrained by their customer base profiles, struggling to push their absolute funding costs lower. Crucially, these dividends are not set to last indefinitely, as executives have cautioned that the cost-saving impact from maturing high-rate deposits will gradually fade over time. When the repricing window eventually closes, the structural differences in each bank's deposit portfolio will emerge as the true long-term determinant of liability costs.
The 210 Billion Yuan Repricing Windfall
With high-cost deposits from earlier periods maturing and being repriced, combined with proactive liability structure optimization, the banking sector experienced a fresh wave of cost reduction in the first half of 2026. An analysis by financial reporters reveals that the combined interest expenses on deposits for the 15 banks totaled approximately 1.18 trillion yuan in H1, down from 1.39 trillion yuan in the year-ago period. This translates to savings of 213.63 billion yuan, a year-on-year decline of roughly 15.33%.
Notably, this significant reduction was not achieved by shrinking deposit bases. Among the 15 banks, 13 institutions—including all six state-owned giants and seven joint-stock lenders—recorded positive growth in total deposits compared with the previous year. The fact that interest expenses fell while deposit volumes rose underscores the critical role of declining average deposit cost rates as the primary lever for funding cost management. In essence, while interest expenses are the absolute outcome on the liability side, the reduction in average deposit cost rates represents the underlying pricing driver, with repricing benefits being steadily released as deposit pricing stays suppressed.
Data shows that all 15 banks saw their average deposit cost rates decline from mid-year levels, with reductions ranging between 25 and 41 basis points. State-owned banks, leveraging their vast customer bases and entrenched low-cost deposit foundations, naturally enjoy lower cost structures, but clear tiering has emerged among them. Postal Savings Bank optimized its deposit mix and aggressively expanded low-cost proprietary deposits, successfully driving its average deposit payout rate down to 0.98% in H1, making it the only major bank to push below the 1% threshold. ICBC, Agricultural Bank of China, and China Construction Bank rely on extensive branch networks, payroll services, and corporate settlement platforms to accumulate substantial demand deposits, keeping their average costs in the 1.1%–1.15% bracket. In contrast, Bank of Communications and Bank of China recorded higher deposit costs among the big six, at 1.49% and 1.40%, respectively.
In the joint-stock bank segment, liability cost improvements were even more pronounced. China CITIC Bank and China Minsheng Bank saw their average deposit cost rates fall by 41 and 40 basis points year-on-year to 1.24% and 1.46%, respectively, leading the field among the 15 institutions. Six other joint-stock lenders, including Ping An Bank, China Everbright Bank, Industrial Bank, Hua Xia Bank, China Zheshang Bank, and Shanghai Pudong Development Bank, also recorded reductions exceeding 30 basis points. China Merchants Bank further strengthened its low-cost funding advantage through sustained deposit structure optimization, cutting its average deposit cost rate by 29 basis points to 0.97%—the industry's lowest payout ratio.
While joint-stock banks posted impressive marginal declines driven by deposits repricing, their absolute average deposit cost levels remain significantly higher than those of state-owned counterparts. This stems from the typically higher share of corporate deposits at joint-stock banks—all nine listed entities have corporate deposit ratios exceeding 50%—while their retail deposit bases remain thinner than those of the major banks, intensifying market competition for funds. The past strategy of relying on higher rates to attract deposits, despite delivering substantial marginal reductions amid repricing, cannot fully bridge the structural cost gap inherent to their business models.
When measuring interest savings, the combination of different deposit scales and varying cost reduction magnitudes has produced vastly different results across banks. State-owned institutions dominate the savings chart thanks to their sheer size. ICBC and China Construction Bank led the charge, each reducing deposit interest expenses by more than 30 billion yuan. Bank of China and Agricultural Bank of China followed closely, saving 29.78 billion and 29.48 billion yuan, respectively, while Postal Savings Bank and Bank of Communications also posted savings in the tens of billions. Within the joint-stock group, China CITIC Bank topped the list with 11.27 billion yuan in interest savings, thanks to its leading cost reductions. By contrast, Hua Xia Bank and China Zheshang Bank, despite benefiting from repricing tailwinds, saw savings hover around the 2 billion yuan level due to constraints on deposit size and structure.
At interim results briefings, senior executives attributed the liability cost improvements to deposit repricing and structural optimization. The president of China Construction Bank, explained that the bank aggressively executed a strategy to capture low-cost settlement funds, effectively transition maturing time deposits, and control high-cost active liabilities. Similarly, a vice president of Bank of China noted that maturing long-term time deposits and deposit mix optimization drove rapid declines in payout rates, offsetting downward pressure on asset yields. He added that the bank would continue prioritizing volume and price management of expensive deposits while optimizing structure, noting that further repricing of long-term maturities in the second half could support continued cost declines.
However, cautionary signals have also emerged. Executives at ICBC indicated that the favorable impact from repricing high-cost legacy deposits will diminish quarter by quarter. The bank's president stressed that net interest margin is now stabilizing, supported more by improved liability costs and structure than by repricing alone. Large banks, with their scale, networks, and customer franchise, are better positioned to balance volume, pricing, and risk. Yet as maturing deposits dwindle and the spread between new and old products narrows, the support from repricing dividends will gradually weaken.
Deposit Endowments Drive Liability Management Gaps
Once the short-term repricing dividend fades, the competition over liability costs will revert to the inherent structural strengths of deposit portfolios. In the current rate-cutting cycle, the composition of personal versus corporate deposits, alongside the mix of demand and time deposits, defines each bank's distinctive liability "internal strength," and the divergent trends in interest expenses across these categories reveal widening gaps.
Breaking deposits down into four categories—personal time, personal demand, corporate time, and corporate demand—reveals how these dynamics play out. Postal Savings Bank stands out with the strongest retail orientation, with personal deposits accounting for 87.08% of total deposits, including 68.38% in personal time deposits and 18.70% in personal demand deposits. Its average payout rates for personal demand and time deposits were just 0.05% and 1.24%, respectively, down 3 and 33 basis points year-on-year. However, both personal demand and time deposit balances declined in H1, with the drop in demand deposits more pronounced, reducing their share of total customer deposits to 18.7% from 20.45% at end-2025.
Analysts point out that Postal Savings Bank's down-market network has accumulated substantial retail demand funds, but ongoing rate adjustments have pushed some of these balances into lower-yield accounts or toward wealth management and money market products, shrinking the demand deposit base. Meanwhile, a significant portion of high-yield time deposits remains within their maturity cycle, so the full cost-saving impact of repricing has yet to materialize.
Shifting focus to corporate-heavy joint-stock banks, China Zheshang Bank and China CITIC Bank stand out with notable corporate deposit concentrations, yet their internal maturity structures differ sharply. At China Zheshang Bank, corporate deposits account for 78.10% of total deposits, comprising 21.47% in corporate time deposits and 56.63% in corporate demand deposits, reflecting substantial enterprise settlement balances. In H1, its interest expenses on corporate time deposits fell by 16.81%, slightly exceeding the 15.33% reduction in corporate demand deposit expenses. In contrast, China CITIC Bank holds a relatively balanced structure, with corporate deposits at 69.7% of total, split between 37.5% demand and 32.2% time. Its interest expenses on corporate demand deposits plunged 47.82% year-on-year, far outpacing the 19.23% decline in corporate time deposits—though this was also tied to a 1.36% reduction in corporate demand balances to 2.04 trillion yuan.
Industry observers attribute these divergent patterns to differences in customer attributes, settlement capabilities, industry chain finance, and institutional business arrangements, alongside the collaborative effects of pricing discipline and shifts in corporate treasury management. For China Zheshang Bank, corporate time deposits often originate from long-term projects and temporary idle operating funds with historically sticky pricing. Through pricing guidance and structural replacement during this repricing cycle, the bank realized substantial savings on maturing medium- and long-term corporate time deposits, while demand deposit pricing offered limited room for adjustment. Conversely, China CITIC Bank, with a higher proportion of institutional and large corporate headquarters clients, benefited from systematic reductions in high-rate corporate demand deposit pricing as industry norms were standardized, while deepening cash management scenarios to replace rate-based deposit attraction. Corporate time deposits, tied to long-term precautionary allocations, adjust more slowly, producing the observed higher demand-side savings.
Experts suggest that evaluating deposit liability management requires a comprehensive view of cost ratios, structural stability, deposit generation capabilities, and alignment with asset yields. A deposit structure that matches a bank's business positioning and is compatible with asset returns constitutes sound liability management. Looking ahead, banks are emphasizing liability management at earnings briefings. The president of Postal Savings Bank highlighted the need to accelerate income structure transformation: although its 1.63% net interest margin leads major banks, pressure persists. The bank plans to optimize business, customer, and regional structures, raise non-interest income contributions, and cultivate a diversified, cycle-resilient revenue mix. Similarly, a vice president of Agricultural Bank of China outlined plans to coordinate general deposits, central bank borrowings, and interbank deposits, expedite the transformation of settlement-based interbank deposits, and rationally utilize active funding tools to sustain optimized growth in all-currency funding sources.
Beyond the Dividend: Net Interest Margins Enter a Phase of Structural Differentiation
While some banks have capitalized on deposit repricing to achieve substantial interest savings, the pronounced divergence in deposit interest trends across different customer segments raises the question of sustainability. The industry broadly agrees that the repricing dividend has its limits. Once it recedes, the operational pressure on bank liabilities will not disappear, forcing lenders to refine their liability foundations in a less favorable environment.
Latest regulatory data shows that the commercial banking net interest margin rose 1 basis point quarter-on-quarter to 1.41% in Q2 2026—the first uptick in nearly four years. State-owned banks, joint-stock banks, city commercial banks, and rural commercial banks saw margins change by 2, 0, 2, and 1 basis points, respectively, to 1.31%, 1.54%, 1.40%, and 1.59%.
After the repricing dividend fades, stabilizing margins will require shifting from reducing legacy costs to optimizing incremental structures. The core lies in anchoring low-cost core deposits and raising the proportion of demand deposits. On the corporate side, this means embedding banks into enterprise settlement flows via scenario-based services; on the retail side, deepening relationships through payroll, social security, and payment retention mechanisms. Simultaneously, new long-duration, high-interest deposit issuance must be tightly controlled. Yet the scope for liability optimization has clear boundaries—structural improvements can offset some margin pressure but cannot fully counterbalance persistent declines in asset yields. Banks must also diversify non-interest income streams and coordinate asset-liability management to sustain overall margin stability.
Experts advise banks to move beyond reliance on deposit-loan spreads, building diversified service systems around wealth management, industry chain finance, scenario-based payments, and risk advisory. Converting ancillary intermediary functions into independent revenue sources and competing through comprehensive services rather than pricing is essential. Concurrently, asset-liability logic must evolve: abandoning pure scale pursuit in favor of a refined balance among asset quality, liability cost stability, and risk-adjusted returns. On the asset side, the emphasis should be on high-value-added real economy sectors; on the liability side, banks must proactively optimize deposit structures through service excellence, constructing a resilient low-cost foundation rather than passively awaiting repricing dividends.
As repricing benefits mature and dissipate, the banking sector's net interest margins are expected to move past the rapid repricing-driven decline. The downward slope will flatten, ushering in a phase of structural differentiation and stabilization. Banks with strong operating and service capabilities can offset margin pressures with non-interest income, gradually guiding industry margins back to a sustainable equilibrium commensurate with real economy returns.