Zheshang Bank: Narrowing of interest margin decline, non-performing loan ratio decreases for four consecutive years to 1.36%

Ask AI · How will Zhejiang Merchants Bank’s new management team respond to the challenge of narrowing interest spreads?

“The current management team members are mostly born in the 70s, with three out of eight being nearly born in the 80s. Overall, they exhibit characteristics of professional deep expertise, reasonable structure, and youthful vigor,” said Chen Haiqiang, Chairman of Zhejiang Merchants Bank.

Text | Researcher Cheng Weimiao from Caijing

Editor | Zhang Yingxin

In February this year, Zhejiang Merchants Bank (601916.SH, 02016.HK), which was newly included in China’s systemically important banks, released its 2025 performance report.

According to its annual report disclosed on March 30, in 2025, the bank achieved operating income of 62.51B yuan and net profit attributable to the parent of 12.93B yuan, showing a decline after three consecutive years of positive growth; asset quality remained stable and improving, with a non-performing loan ratio of 1.36% at the end of the year, down 0.02 percentage points from the previous year, marking four consecutive years of decline.

At the performance briefing on March 31, the bank’s new management team made its first public appearance. “Currently, the management team members are mostly born in the 70s, with three out of eight nearly born in the 80s, showing characteristics of professional deep expertise, reasonable structure, and youthful vigor,” said Chen Haiqiang, who was promoted to Chairman of Zhejiang Merchants Bank in December last year.

The current macroeconomic environment is increasingly complex and severe, posing certain challenges for the new team. When addressing issues such as asset quality, financial market operations, and interest spreads, the management of Zhejiang Merchants Bank mentioned the uncertainties brought by changes in the external environment.

Meanwhile, the new management team also conveyed confidence and determination to the market and investors through three “certainties”: “First, the certainty of continuous marginal improvement in asset quality; second, the certainty of growth momentum; third, the certainty of enhanced capital returns,” said Chen Haiqiang. Notably, during last year’s performance meeting, “crossing cycles” was one of the frequently mentioned keywords and was seen as a continuation of Zhejiang Merchants Bank’s long-term philosophy.

Interest spread narrowing

2025 is the final year of China’s 14th Five-Year Plan and also the final year of Zhejiang Merchants Bank’s “Four-Five” plan. In this year, the bank was included in China’s list of systemically important banks for the first time.

In February this year, the People’s Bank of China and the China Banking and Insurance Regulatory Commission announced the list of China’s systemically important banks for 2025, comprising 21 banks, including six large state-owned banks, ten nationwide joint-stock banks, and five city commercial banks. Zhejiang Merchants Bank was included, entering the first group.

“This inclusion not only recognizes Zhejiang Merchants Bank’s comprehensive strength and core competitiveness but also sets higher standards and stricter requirements for its responsibility and compliance management,” Chen Haiqiang said at the performance briefing.

Being designated as a systemically important bank requires meeting higher capital and leverage ratio requirements. The annual report shows that by the end of 2025, Zhejiang Merchants Bank’s capital adequacy ratio was 12.12%, Tier 1 capital adequacy ratio was 9.6%, core Tier 1 capital adequacy ratio was 8.4%, and leverage ratio was 5%, all meeting regulatory requirements.

Meanwhile, several indicators of Zhejiang Merchants Bank maintained steady growth. By the end of 2025, the bank’s total assets reached 3.48 trillion yuan, an increase of 4.68% from the previous year. In his annual report speech, Chen Haiqiang reviewed that over the past five years, the bank’s total assets increased by 1.43 trillion yuan, a 70% growth; deposits exceeded 2 trillion yuan, increasing by 700 billion yuan over five years, a 52% rise; loans totaled 1.9 trillion yuan, also up 700 billion yuan over five years, a 60% increase.

In terms of performance, affected by industry-wide issues such as narrowing interest spreads and declining investment income, the bank achieved operating income of 34.8k yuan and net profit attributable to the parent of 14.3k yuan in 2025, both showing year-on-year declines. However, looking at the longer term, from 2022 to 2024, the bank’s revenue and net profit grew positively for three consecutive years.

Regarding the trend of net interest margin, Lu Linhua, the acting President (designate) of Zhejiang Merchants Bank, stated at the performance briefing that by the end of 2025, the bank’s net interest margin was 1.6%, down 11 basis points (BP) from the previous year. The decline has narrowed compared to the previous two years, as the high-yield assets previously issued are gradually maturing and exiting.

Non-performing loan ratio declining for four consecutive years

In recent years, despite the intertwining of various external risks, Zhejiang Merchants Bank’s asset quality has maintained an improving trend. By the end of 2025, the non-performing loan ratio was 1.36%, down 0.02 percentage points from the previous year, marking four consecutive years of decline. The provision coverage ratio was 155.37%, and the loan loss reserve ratio was 2.11%.

At the performance briefing, Pan Huafeng, Vice President (designate) and Chief Risk Officer, explained the composition of the bank’s non-performing loans: in terms of business lines, thanks to increased disposal of non-performing corporate loans, the non-performing loan ratio for corporate loans was 1.1% at the end of 2025, down 0.26 percentage points from the beginning of the year.

For retail small loans, affected by insufficient domestic demand, deep adjustments in the real estate sector, and weak repayment willingness among some micro and small enterprise and individual clients, the non-performing loan ratio for personal loans was 2.45% at the end of 2025, up 0.67 percentage points from the beginning of the year. He also mentioned that most personal loans are mortgage-backed, small in amount, and numerous in number. Due to weak demand and lengthy judicial procedures, risk disposal is relatively slow. “We believe that the ultimate losses are controllable,” he emphasized.

Looking ahead, Pan Huafeng said that China’s overall economic operation remains stable and progressing, with new achievements in high-quality development. However, the turbulent international geopolitical landscape and the complex overlay of various risks may continue to impact global economic and financial stability, demanding higher precision and foresight in bank risk management.

In response, Zhejiang Merchants Bank will adopt four measures to cope with the complex new situation: first, cultivating a risk culture and strengthening the foundation of prudent management; second, improving institutional mechanisms and enhancing strict management efficiency; third, leveraging digital empowerment to develop intelligent risk control tools; and fourth, deepening risk disposal to support high-quality development.