Total assets exceed 3.48 trillion yuan, yet a fine of 46.45 million yuan was imposed! What hidden concerns are revealed in Zhejiang Merchant Bank's 2025 performance report?

On March 30, 2026, Zheshang Bank (601916.SH) disclosed its 2025 annual report, with total assets surpassing 3.48 trillion yuan, a year-on-year increase of 4.68%. At the same time, Zheshang Bank achieved operating income of 34.8k yuan in 2025, a decrease of 7.59% year-on-year, and net profit attributable to the parent company shareholders of 62.51B yuan, down 14.85% year-on-year.

“Eyeglasses Finance” notes that, in addition to declines in revenue and profit, Zheshang Bank received multiple regulatory fines during the year, with total penalties exceeding 46 million yuan, and several senior executives held accountable. As a newly designated systemically important bank, Zheshang Bank’s operational performance in 2025 reflects the real challenges faced by medium-sized joint-stock banks under the dual pressures of compliance management and business development.

Fines Concentrated

Multiple violations occurred, senior executives held accountable, compliance management shows weaknesses

In 2025, Zheshang Bank faced significant challenges in compliance governance, with total fines and penalties amounting to 46.4575 million yuan, 21 fines issued, and 29 responsible persons held accountable. Violations covered the head office and branches in Shanghai, Shenzhen, Wenzhou, Hangzhou, Chengdu, and others, spanning credit management, anti-money laundering, account management, and more, indicating deficiencies in compliance management.

Among these, large fines at the head office drew particular attention. In September 2025, the State Financial Supervision and Administration Bureau fined Zheshang Bank’s head office 11.308 million yuan for inadequate management of internet lending and other businesses. Responsible person Tan Feida received a warning, reflecting obvious shortcomings in the bank’s risk control system for internet lending.

In the same month, the People’s Bank of China imposed administrative penalties on Zheshang Bank’s head office for violations including account management, merchant management, anti-counterfeiting currency regulations, occupying fiscal deposits, illegal collection of credit information, failure to perform customer identity verification, and failure to report large transactions. The bank was warned and fined 2.9599 million yuan. Eight senior executives, including the then General Manager of Operations Management, Song Muren, the General Manager Assistant of the Online Financial Department, Lu Mou, and the General Manager of Fintech, Yang Mouzheng, were simultaneously held responsible. Fines ranged from 10k to 70k yuan, revealing systemic weaknesses in the head office’s compliance management.

Meanwhile, violations at branch offices were also prominent. In January 2025, Shanghai Branch was fined 16.8 million yuan for issues including inaccurate classification of micro and small enterprises, fictitious loan increases, non-standard credit practices, ununified asset pool credit, lax trade background review, and inadequate management of abnormal employee behaviors. Seven managers received warnings and fines, setting a record for single-branch penalties in the year.

Additionally, Shenzhen Branch was fined 3.3 million yuan for inadequate pre-loan investigations and improper management of group client credit, with nine responsible persons held accountable. Wenzhou Branch was fined 1.35 million yuan for insufficient “three checks” during lending and cautiousness in financial product sales. Chengdu Branch was fined 2.1 million yuan for lax credit, bill, and fee management, with notable risks in trade background review of bills.

It is worth noting that some violations at Zheshang Bank have recurred. Issues such as fictitious loan increases, inadequate credit checks, poor management of abnormal employee behaviors, and deficiencies in anti-money laundering work have been penalized multiple times in previous years. However, in 2025, these issues not only remained unresolved but also saw increases in penalty amounts, scope of violations, and involved senior executives, raising concerns about the effectiveness of compliance culture, risk control system construction, and rectification efforts.

Performance Under Pressure

Revenue and net profit both decline sharply, non-interest income drops significantly

Under increased compliance pressures, Zheshang Bank’s operational performance in 2025 declined markedly, with both revenue and net profit falling by double digits, performing relatively poorly among joint-stock banks.

Annual report data shows that in 2025, Zheshang Bank achieved total operating income of 12.93B yuan, down 7.59% year-on-year, ending three consecutive years of positive growth, exceeding market expectations. Net profit attributable to the parent company was 11.31M yuan, down 14.85%, with a significantly larger decline than revenue, indicating a decrease in profitability efficiency and increased pressure on profit generation.

The narrowing net interest margin was the core factor behind the performance decline. In 2025, Zheshang Bank’s net interest margin was 1.60%, down 11 basis points year-on-year, ranking at the lower end among joint-stock banks. Yield on interest-earning assets was 3.12%, down 0.55 percentage points; cost of interest-bearing liabilities was 1.57%, down 0.41 percentage points. The decline in earnings at the revenue side outpaced the cost side, leading to continued compression of the net interest spread. A significant reduction in interest income from loans, coupled with weak credit demand and falling interest rates, squeezed profit margins, posing substantial challenges to traditional interest spread business growth.

Non-interest income also fell sharply, further intensifying performance pressure. In 2025, non-interest net income was 10k yuan, down 19.73% year-on-year, becoming one of the main drag factors for the decline. Fee and commission net income was only 11.23 billion yuan, accounting for less than 18% of total operating income, far below the levels of peers like China Merchants Bank and Ping An Bank. The bank’s wealth management and investment banking intermediary businesses need improvement. Market volatility in bond markets led to increased fair value losses on trading financial assets, and fund distribution revenues shrank significantly, with non-interest income’s hedging effect on performance being insufficient.

Operational Concerns

Asset quality under pressure, provisions and capital adequacy under strain

Beyond compliance and performance issues, Zheshang Bank in 2025 also faces potential challenges such as asset quality pressure, declining loan loss coverage, and tightening capital adequacy ratios, with notable weaknesses in business structure and risk mitigation capacity.

“Eyeglasses Finance” found that, regarding asset quality, the bank’s non-performing loan (NPL) ratio slightly declined but risks have not been fully released. As of the end of 2025, the NPL ratio was 1.36%, down 0.02 percentage points year-on-year, but the NPL balance increased by 70k yuan, up 3.75%. The NPL balance shows a rising trend. Loss loans totaled 62.51B yuan, up 131.48%, accounting for 0.45% of total loans, indicating a migration of risk to the back end. Watchlist loans accounted for 2.36%, still at a relatively high level, with potential risks not to be ignored. Overdue loans amounted to 12.93B yuan, representing 1.81% of total loans, significantly higher than the NPL ratio. Overdue loans over 90 days increased by 3.22 billion yuan, with risk recognition remaining strict.

The loan loss coverage ratio dropped sharply, weakening risk resistance. At the end of 2025, the bank’s loan loss coverage ratio was 155.37%, down 23.30 percentage points from the previous year, below the industry’s reasonable range of 200%, and at a relatively low level among joint-stock banks. The loan provision ratio was only 2.11%, just meeting regulatory minimums, leaving limited buffer for risk mitigation. If non-performing loans further increase, profitability could be affected.

Capital adequacy ratios are under pressure, with the balance between dividends and business growth needing optimization. As of the end of 2025, the bank’s core Tier 1 capital adequacy ratio was 8.42%, down 0.54 percentage points, approaching regulatory minimums. Tier 1 capital adequacy ratio was 9.60%, and total capital adequacy ratio was 12.12%, both declining from the previous year. Under the pressure of profit decline and capital replenishment, the board proposed a cash dividend of 1.31 yuan per 10 shares, totaling 3.85 billion yuan, accounting for 29.77% of net profit attributable to the parent. The high dividend payout could further deplete capital, constraining business expansion and risk resistance.

The imbalance in business structure remains prominent. In 2025, net interest income was 18.06B yuan, down 3.2% year-on-year, accounting for 71.12% of total operating income, while non-interest income accounted for only 28.88%, indicating over-reliance on traditional interest spread business. Despite the “light bank” transformation goal, development of intermediary businesses lagged, and the profit structure remains single. In the context of continued narrowing interest margins, risk resistance needs improvement.

Additionally, “Eyeglasses Finance” observed that Zheshang Bank’s cash flow in 2025 showed significant fluctuations, indicating liquidity management challenges. Operating cash flow was negative 52.88B yuan, turning from positive, reflecting a temporary weakening in business cash generation. Cash flow from investing activities was 8.71B yuan, and financing activities was negative 34.71B yuan, showing a pattern of “negative operating cash flow, asset disposals, and shrinking financing scale,” requiring asset disposals to maintain liquidity and increasing pressure on fund management.

Source: Eyeglasses Finance