After three years of reform, the chairman steps down; Qingdao Rural Commercial Bank faces renewed "home turf anxiety."

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Recently, Wang Xifeng, chairman of Qingdao Rural Commercial Bank, who had topped the "A-share Rural Commercial Bank Salary Rankings" for two consecutive years, officially retired upon reaching the age limit, bringing an end to nearly three years of his leadership.

The departure of this veteran executive has not only sparked discussions about the bank's compensation mechanism in the market but also pushed Qingdao Rural Commercial Bank’s performance during his tenure into the spotlight.

When Wang Xifeng took over in 2022, Qingdao Rural Commercial Bank was deeply mired in a rare ten-year performance trough. Profits fell more than 20% year-on-year, and the bank was fined over 70 million yuan due to imprudent real estate loan management and other reasons.

After three years of "contrarian" turnaround, the bank’s profits have entered a stable upward trajectory. Even with a 4.92% decline in revenue in the first three quarters of 2025, it still managed growth of 3.57%, showing certain resilience in profitability.

However, behind the halo of growth, worries remain ever-present:

In the first half of 2025, non-performing rates in the real estate sector have surpassed 20%, with credit expansion nearly coming to a halt; meanwhile, the rapid progress of Qingdao Bank and Qilu Bank in the same region has continually squeezed Qingdao Rural Commercial Bank’s market share.

Facing the dual challenges of internal asset quality pressure and intensified external competition, the new management must seek a difficult rebalancing amid risk resolution, scale growth, and regional competition.

Asset-Liability Mismatch

Breaking it down, Qingdao Rural Commercial Bank's business structure remains traditional. In the first three quarters, the contribution rates of interest, fee income, and investment were 68.63%, 8.73%, and 19.61% respectively, growing 2.06%, 2.51%, and 32.59% compared to the same period last year.

Among these, loan (the main business) growth is lackluster; after years of light-asset transformation, fee income still cannot provide enough support; although investment returns have increased significantly, factoring in fair value fluctuations from bond market volatility, overall, it has still slightly declined.

Qingdao Rural Commercial Bank's fatigue and embarrassment in transformation is a microcosm of rural commercial banks' struggles under regional competition:

As the macroeconomy enters a new cycle and state-owned banks and city commercial banks begin to go downstream, if rural commercial banks cannot build a differentiated moat in increasingly fierce regional competition, they will inevitably face the danger of "sailing against the current."

For years, loan business has been the absolute mainstay of Qingdao Rural Commercial Bank’s revenue; from 2020 to the first three quarters of 2025, although the contribution rate of interest income has steadily declined, it has remained around 70%.

The fluctuations in the proportion of interest income stem partly from proactive investments yielding good returns during recent bond market volatility, providing performance support; but on the other hand, as net interest margins fall, loan income decreases passively, and interest income has shown a downward trend for years.

Within financial industry competition in Qingdao, Qingdao Rural Commercial Bank's advantage lies mainly on the liability side.

According to United Credit Ratings’ report, from 2022 to 2024, the bank's deposit market share always ranked first in Qingdao;

While maintaining a quantitative lead, the deposit cost rate in 2024 was only 1.92%, 0.18 percentage points lower than Qingdao Bank in the same region. The natural advantage of deposit stability at rural commercial banks relative to city commercial banks further supports Qingdao Rural Commercial Bank’s liquidity.

On the other hand, the bank's asset-side performance is comparatively weaker.

First, both loan market share and growth rate are mediocre; in the first three quarters, compared to the beginning of the year, growth was only 0.77%, lagging deposit growth by 1.83 percentage points;

Second, pricing power is insufficient, with a loan yield of 4.32% in 2024, trailing Qingdao Bank’s by 0.29 percentage points;

Third, asset quality is poor, with a 1.73% non-performing rate at the end of the third quarter—the worst among A-share city commercial banks.

By the end of the third quarter, the loan-to-deposit ratio had fallen to 79.99%, a relatively low level in the industry, indicating inefficient use of funds.

The mismatch between asset-side and liability-side capabilities prompts Qingdao Rural Commercial Bank to allocate more resources to financial investments and pursue a light-asset transformation, but judging from the recent years’ results, neither path has been smooth.

The first challenge is that the investment segment has been highly volatile due to bond market fluctuations.

Driven by the 2024 “bull market” in bonds, the bank’s investment income and fair value changes increased by 279 million yuan and 579 million yuan respectively, a total year-on-year growth of 26.8%, contributing about one-third of annual profits;

But in this year's bond market volatility, investment income and fair value changes in the first three quarters have already dropped 22.4% year-on-year, with a loss of 338 million yuan in fair value changes in the third quarter alone.

The second challenge is the direct competition with local financial institutions such as Qingdao Bank on the path to light-asset transformation.

Take wealth management, for example: according to surveys including product evaluation and questionnaires by Puyi Standards, while Qingdao Rural Commercial Bank's wealth management capabilities rank among the top in rural commercial banks, its issuance, return, product development, and operational management still lag behind Qingyin Wealth Management, a subsidiary of Qingdao Bank.

From 2020 to 2024, the bank’s fee income share has risen from 3.16% to 7.09%; the gap with Qingdao Bank in fee income has narrowed from the peak of 1.463 billion yuan in 2021 to 531 million yuan.

However, XinFeng notes that during the round of "deposit migration" that began in July, Qingdao Rural Commercial Bank’s growth rate still lagged behind Qingdao Bank; between July and September, fee income growth rates were 5.39% and 7.14% respectively for the two banks.

This means that while the bank has made strenuous efforts in its light-asset business, there is still a gap compared to other local financial peers.

Internal and External Challenges

In 2022, Qingdao Rural Commercial Bank had the slowest profit growth of all A-share banks, at -24.11%;

Now, profits have returned to growth, with its net profit growth ranking 18th out of 42, placing it in the upper midfield among peers.

At present, the bank's core dilemma has shifted from declining performance to "internal and external" troubles without short-term solutions:

Constant blow-ups in its own real estate business require the bank to shift from offense to defense, re-examining its risk management system and loan structure to seek a new balance among volume, pricing, and risk;

Meanwhile, the rapid expansion of Qingdao Bank (which is based in Qingdao) and Qilu Bank (which aims at the entire province) is continuously squeezing Qingdao Rural Commercial Bank’s future survival space.

By the end of the third quarter, the bank's 1.73% non-performing loan ratio was the worst among listed rural commercial banks.

Especially, asset quality in the real estate sector is particularly unstable, having experienced two rounds of blow-ups;

In 2022, its real estate business suffered a massive asset quality shock, with a non-performing rate rising to 6.1% and dragging the bank’s overall NPL ratio to 2.19%, the worst among A-share peers.

After aggressive write-offs, the real estate NPL ratio once dropped to 1.36%;

Yet within less than a year, another real estate business blow-up occurred, with NPLs in the first half of 2025 soaring to 21.32%, meaning more than one-fifth of the loan balance was provisioned as bad debt.

The bank explained that this was due to "risk exposure from individual loans, which is being addressed, and is a normal fluctuation."

Such large-scale blow-ups have not occurred at other banks in the same region; for instance, in the first half of 2025, Qingdao Bank’s real estate loan NPL ratio was only 1.89%.

Recurring risk assets may be legacies of past concentrated lending and lax compliance:

In 2022, the bank was fined 44 million yuan, and 28 responsible persons penalized (one banned for life) for several violations including extremely imprudent real estate loan management.

A year later, the bank sued China Overseas Real Estate and the third-largest shareholder “Balong Group” to reclaim more than 2 billion yuan in loans, but when the court attempted to enforce judgment, the counterparties had no assets available for execution, ultimately resulting in large bad debts.

With the second real estate blow-up, the bank is bound to set aside more capital for write-offs, which may further pressure profits.

Notably, other banks in the same region are still in a rapid expansion phase.

Shandong has three A-share listed banks—Qilu Bank, Qingdao Bank, and Qingdao Rural Commercial Bank.

Since 2021, Qingdao Rural Commercial Bank, previously neck-to-neck, has experienced a sharp downturn in profit growth compared to the other two city commercial banks.

In the first three quarters this year, Qingdao Bank and Qilu Bank ranked first and second among A-share listed banks in terms of profit growth, while Qingdao Rural Commercial Bank ranked only twentieth, lagging by 10 percentage points.

Qingdao Rural Commercial Bank's current strategy is to take Qingdao as the main base and expand into other counties in the province:

By mid-year, the share of loans in Qingdao and other regions was 93.91% and 6.09% respectively, with the proportion outside Qingdao up 0.11 percentage points compared to the start of the year.

Since 2025, the bank has repeatedly ramped up its efforts outside Qingdao, obtaining approval to set up 24 branch outlets beyond Qingdao and has merged with five rural banks (Rizhao, Jining, Yinan, etc.) to expand its operating area.

This means the bank will face direct competition from more financial peers in new arenas.

XinFeng notes that Qilu Bank, also a listed bank, is pushing the construction of county branches across the province, accelerating the delivery of financial services to rural areas.

There are now 110 rural commercial banks in Shandong; just the three cities Qingdao Rural Commercial Bank focused on—Jining, Rizhao, Linyi—have 11, 4, and 11 rural commercial banks respectively, not to mention city commercial banks and numerous branches of nationally owned banks in counties.

All this indicates Qingdao Rural Commercial Bank faces a tough road ahead in its expansion outside Qingdao.

Beyond “internal and external troubles,” the bank also faces personnel and policy uncertainties.

Wang Xifeng, the chairman who recently retired, was born in 1965; the acting chairman, Yu Fengxing, was born in 1968; the average age of senior management is 54, and vice presidents Ding Ming and Wang Yu are also “post-1965s".

This means the management team will continue to undergo personnel changes in the next five years, which may affect strategic continuity.

Additionally, Shandong province’s unannounced rural credit institution reform plan may affect the bank’s development path.

In the new wave of reform of rural credit institutions, provinces mainly have two choices:

One is to retain a two-tier legal entity structure—county-level rural commercial banks/rural credit cooperatives form a provincial joint bank, taking equity participation "upward or downward" to keep local vitality while increasing synergy and risk resistance;

The other is to create a province-wide unified legal entity rural commercial bank, through new establishments or merger and absorption, revoking the county-level banks’ legal status, making them branches of the provincial bank, which enables rapid risk resolution with unified standards and concentrated resources.

In provinces like Jiangsu and Zhejiang, which have formed provincial joint banks, listed rural commercial banks such as Changshu Bank, Zijin Bank, and Ruifeng Bank have retained independent legal status and benefited from joint banks’ empowerment;

But in provinces like Hainan and Jilin, with unified provincial banks, Qiongzhong Rural Credit has delisted from the New Third Board and revoked its legal entity status, with all business, assets, and liabilities assumed by Hainan Rural Commercial Bank; Jiutai Rural Commercial Bank has delisted from the HKEX and may be merged into Jilin Rural Commercial Bank.

Given the uncertainty of different reform paths, the impact on Qingdao Rural Commercial Bank remains to be seen.

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