Sample of city commercial banks' transformation: Understanding the "small but beautiful" approach from Huaxing Bank's annual report

Questioning AI · Why is Huaxing Bank still increasing provisions despite profit pressure?

Southern Finance Reporter Chen Yiran

Recently, Guangdong Huaxing Bank released its 2025 annual report. The report shows that the bank’s asset and liability scale has achieved steady growth. As of the end of 2025, total assets reached 485.57B yuan; loans and advances issued were 257.01B yuan, a 4.70% increase from the beginning of the year; deposits absorbed were 335.01B yuan, a 6.98% increase from the beginning of the year, with the overall scale continuing to solidify.

However, the bank’s profitability level has experienced temporary pressure. In 2025, it achieved a net operating income of 8B yuan and a after-tax net profit of 7.35B yuan, both decreasing year-on-year. Among them, net interest income was 1.51B yuan, and non-interest income was 5.61B yuan, mainly affected by bond market fluctuations last year, leading to a decline in investment income.

Meanwhile, the bank actively increased its provisioning efforts to strengthen its risk resistance foundation and retain more profits for strategic implementation. As of the end of 2025, the non-performing loan ratio was 1.65%, better than the average level of city commercial banks nationwide; the provision coverage ratio was 202.22%, ranking among the top in provincial legal city commercial banks.

The current banking industry is facing a new normal of “three lows and one high”: low growth, low demand, low interest rate spreads, and high risks. Transitioning from scale expansion to high-quality development has become an inevitable choice for small and medium-sized banks. The weakening of the bank’s profit indicators is a reflection of industry-wide pressures combined with the effects of its own accelerated strategic transformation, not a fundamental operational issue.

What is more noteworthy is that, against this background, Huaxing Bank remains committed to its “small and dispersed” and “retail transformation” strategic focus. It proposes to adhere to the operating strategies of “public and private business linkage, retail customer acquisition in bulk, and open cooperation with peers,” actively focusing inward, increasing structural adjustments, and strengthening its business foundation. The bank is steadily building a differentiated development moat, with many operational highlights in 2025.

In terms of corporate business layout, Huaxing Bank has always adhered to a long-term, quality, and customer group-oriented operating philosophy, delivering a good report card of “growth in特色业务,提升在价值客户,小而分散的经营取得实效,公私联动有价值” throughout the year.

As of the end of 2025, the bank’s特色业务贷款余额 reached a historic high. Among them, the green credit balance accounted for 13% of corporate loans; in the cultural and educational finance sector, the bank continued to maintain a leading position, being the city commercial bank with the highest proportion of large cultural and educational financial services within the province; financial services for科技金融,先进制造业金融,产业园金融等业务加速起势，成为公司业务长期增长的新引擎。

On the other hand, the bank focuses on value customers, expanding high-quality private enterprises, listed companies, and state-owned enterprises, promoting a shift from scale-driven to value-driven corporate business through customer structure optimization.

Data shows that in 2025, the bank’s corporate value customers increased by 27% year-on-year, the new account conversion rate rose to 30%, and the comprehensive financial contribution of value customers reached a new high; cooperation coverage with A-share listed companies in Guangdong increased to 34%. Through precise service to high-quality clients, the bank further consolidates asset quality and enhances business value.

As a city commercial bank rooted in Guangdong, the bank leverages local private economy and manufacturing advantages, driven by supply chain customer acquisition and core loan replenishment, solidly implementing the “small and dispersed” strategy.

Among them, the “1+N” supply chain finance launched multiple market-oriented products, covering core enterprises and upstream and downstream clients in manufacturing, wholesale, and other fields. The annual data confirms the effectiveness: the supply chain financing business volume and on-balance-sheet loans’ average daily scale doubled, with increases of 131% and 106%, respectively; core enterprise growth was 255%, N-end customer growth was 295%; the bank’s supply chain business coverage reached 64%, the proportion of “1+N” supply chain loan customers increased to 18%, and the transformation of “small and dispersed” has shown remarkable results.

In 2025, Huaxing Bank’s retail transformation also achieved key breakthroughs, with significant improvements in retail business value creation.

The bank issued a total of 31.8 billion yuan in inclusive micro and small loans throughout the year, with growth rates higher than the average growth of all loans in the bank. It fully utilized the People’s Bank of China’s re-lending tools for supporting agriculture and small businesses, precisely targeting micro and small market entities, using financial liquidity to help enterprises overcome difficulties, and diligently fulfilling its inclusive social responsibility.

Digital transformation has become the core driver of retail business growth. The bank has built four major customer acquisition pillars: community, public-private linkage, etc., forming a scalable and sustainable customer acquisition system, with a year-on-year increase of over 36% in new customers. The full-process digital operation system has been fully implemented, significantly increasing online customer scale and coverage. Through deep integration of “platform + data + AI,” tools such as the smart banker system and AI financial advisor have been launched successively, continuously improving customer service efficiency and accuracy; the newly rebuilt rights points platform further optimizes customer service experience.

The results of the transformation are directly reflected in scale and customer groups. As of the end of 2025, the bank’s retail deposit balance was 1.74B yuan, an increase of over 20%, with retail deposits accounting for 20.37%, doubling over three years; the scale and proportion of agency distribution business continued to rise, with agency wealth management balance increasing by 89.1% year-on-year, new premium insurance scale increasing by 108% year-on-year, and public fund holdings increasing by 33.5% year-on-year; customer groups steadily improved, with retail value customers increasing by 21.71%, wealth customers by 24.92%, and private diamond customers by 20.61%.

In terms of product and scene layout, the bank has gradually built differentiated and特色化的零售服务优势. Two branches successfully launched the local financial social security card, achieving key breakthroughs in government-bank-citizen cooperation; the Shantou “Village Doctor Pass” project was implemented, covering a vast rural customer base with innovative payment services;养老金融围绕老年人“医、食、住、行、学”五大核心场景，建成独具华兴特色的服务模式，民生金融品牌影响力持续扩大。

Meanwhile, Huaxing Bank continues to improve its investment banking and financial market business layout. During the year, the bank’s qualification licenses were continuously expanded, including approval as a bond settlement participant and Shenzhen Stock Exchange bond trading participant, becoming the second city commercial bank nationwide and the only one within Guangdong to hold all three major exchange bond trading participant qualifications in Beijing, Shanghai, and Shenzhen.

Trading capabilities steadily improved, market reputation continued to grow, and the bank strengthened its bond, bill, and foreign exchange markets. It handled nearly 6.5 trillion yuan in foreign exchange transactions in the year; in the interbank market, it was awarded the honor of “Most Market-Welcomed Credit Bond Market Maker” for four consecutive years.

Huaxing Bank states in its annual report that it will continue to implement the two core strategies of “small and dispersed” and “retail transformation,” maintain a balance among scale, profitability, and risk, comprehensively upgrade risk management, customer operations, and technological empowerment, and steadily promote the construction of a “specialized, refined, and innovative” boutique bank, continuously strengthening its differentiated competitive barriers.