China regional banks hold 26.4% of system assets as consolidation deepens

Mega banks controlled 43.9% of system assets at end-2025.

Regional banks accounted for 26.4% of China’s banking system assets at the end of 2025, as authorities continued efforts to reduce risks amongst smaller lenders.

Mega banks remained the largest part of the system, holding 43.9% of assets. Joint-stock banks accounted for 16.2%, whilst other financial institutions held 13.5%, according to S&P Global Ratings.

S&P said China is likely to continue consolidating its regional banking sector, particularly weaker lenders that face greater financial pressure.

Amongst 57 regional banks sampled by S&P, the institutions had an average asset share of 13.1%. Other regional banks accounted for another 13.3% of banking system assets.

Recent consolidation includes Jinzhou Bank, which was acquired by Industrial and Commercial Bank of China Ltd. in 2025. 

Wuhan Zhongbang Bank was taken over by regulators in 2026.

Hundreds of village and township banks have also been consolidated or deregistered in recent years. 

Regional banks classified as high risk, or in the regulatory “red zone”, account for about 2% of banking system assets, according to S&P.

The ratings agency expects credit profiles across regional banks to become more varied as China changes its economic priorities.

Many of these banks have traditionally lent to property developers and local government financing vehicles, partly because of their close links with local governments. 

Both sectors have come under pressure from high debt levels and weakness in the property market.

China is shifting away from credit-driven growth towards higher-value industries, technological development and advanced manufacturing.

S&P economists expect the economy to grow by at least 4% annually over the next one to two years. 

The agency also expects banking sector loan growth to slow to the mid-single-digit range in 2026 and 2027, compared with more than 10% before 2023.

As the economy changes, S&P expects loan growth in the banking sector to slow to the mid-single-digit range in 2026 and 2027, compared with growth of more than 10% before 2023.