China Minsheng Bank is still in "extreme defense mode"
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The financial reports of commercial banks are often the most sensitive developer of the macroeconomic cycle.
In 2025 and the early part of 2026, when the Loan Prime Rate (LPR) has been consecutively cut and the banking industry is generally facing narrowing net interest margins, China Minsheng Bank’s financial data are showing a trajectory that runs counter to industry intuition.
In the first quarter, Minsheng Bank’s net interest margin, which had declined for years, finally stabilized and even bucked the trend to rise by 2 basis points from the beginning of the year to 1.43%. During the same period, the bank’s operating income reached 37.822 billion yuan, maintaining a year-on-year growth of 2.74%.
However, the stabilization and improvement in revenue seems unable to cover up the harsh reality on the profit side —
In the first quarter, Minsheng Bank’s net profit attributable to shareholders fell by 9.64% year-on-year, ranking at the bottom among the 42 A-share listed banks.
Since revenue is stabilizing and rising, why has the net profit — what ends up “in the pocket” — instead shrunk considerably?
The answer is: the money earned has all been used by management to fill in the holes left by previous asset quality problems.
This contrast reflects Minsheng Bank’s current real situation: the outwardly aggressive results are actually a “tightening the belt” defensive measure, as the bank is still cleaning up its balance sheet by trading time for space.
Cutting Off the Arm to Survive
The market was not unprepared for Minsheng Bank’s profit shrinkage. Since 2022, the bank’s profit growth has shown fatigue, and since 2024 it has long been in negative territory.
The core reason is that most of the marginal revenue generated by the front-end departments has been used to fill the gap of non-performing assets.
When a bank writes off bad debt, the first thing it uses up is not that year’s profit but its previously accumulated “provision pool”.
But regulation stipulates that a bank’s provision coverage cannot fall below 130%. Therefore, once aggressive bad loan write-offs cause the pool to run low, the bank can only use the current newly earned revenue to “replenish the pool” (make more provisions).
Eating up Minsheng Bank’s profits is exactly this huge “replenishment fee”.
In 2024-2025, Minsheng Bank’s annual loan loss write-offs and transfers reached the hundred-billion level. In order to maintain the provision coverage, the bank had to set aside 53.95 billion yuan in credit impairment losses in 2025.
The script in 2026 is playing out the same way.
In the first quarter, the bank made credit impairment provisions of 13.892 billion yuan, far exceeding last year’s 10.858 billion yuan. The additional 3 billion yuan in provisions directly turned a 2.74% revenue growth in the first quarter into a -9.64% drop in profit.
Trading profits for quality is paying a belated bill for past aggressive expansion.
Around 2020, Minsheng Bank had a concentrated outbreak of non-performing risk: events like Kangde Xin and Huishan Dairy surfaced, credit card NPL rates climbed, pushing overall non-performing loan ratios to 1.82%, the worst among joint-stock banks.
Over the following five years, Minsheng Bank fell into a long process of asset quality repair.
By 2025, although the bank’s non-performing ratio had improved to 1.46%, the repair process was far from over.
At the end of the first quarter, the provision coverage ratio fell to 141.94%, tightly hugging the regulatory red line. Facing the continued exposure of lingering bad debts, the provision pool has no buffer. Management abandoned the old trick of using provisions to adjust profit and instead decided to absorb all risk directly from current profit — a hard-line clean-up strategy.
The reduction of corporate real estate loans has been the main battleground for this clean-up.
In 2025, Minsheng Bank’s corporate real estate NPL ratio dropped sharply from 5.01% the previous year to 3.61%.
This sharp drop isn’t due to a natural industry rebound, but rather the result of aggressive lawsuits and forced asset liquidation.
In early years, Minsheng Bank’s equity was long dispersed, and once found itself in turmoil because of the involvement of “Oceanwide” and “Anbang” capital factions. By 2024, Oceanwide, Dongfang, and Evergrande still had hundreds of billions of loan exposure at Minsheng Bank.
With senior management with extensive state-owned bank risk-control experience such as Gao Yingxin from Bank of China (2020) and Wang Xiaoyong from CCB (2024) successively joining, Minsheng Bank’s past compromises with major shareholders and “scale over risk management” aggressive style were completely ended.
For example, at its Beijing branch, since 2023 the bank has gradually sued long-time counterparties like Oceanwide Holdings and China Oceanwide. By March 2026, in cases suing Oceanwide Holdings for repayment of 2.4 billion yuan in principal and interest, 7 lawsuits had won effective judgments and entered enforcement phases.
Regarding the game between profit and asset quality, President Wang Xiaoyong wasn’t evasive and pointed out “the main reason for profit decline is increased disposal of non-performing assets and provisions.”
Chairman Gao Yingxin further stated that the company would rather not take on questionable deals under current circumstances.
The managers’ attitude is corroborated by strong action in court and enormous financial write-offs.
By “cutting off the arm to survive”, Minsheng Bank is severing historical burdens. The steep shrinkage of the profit and loss statement is also the inevitable path to a return to standard compliance and risk control.
Extreme Refocusing
Under the pressure of assets, Minsheng Bank in recent years has shifted from offense to comprehensive defense.
On the one hand, the real cash made each period is entirely used to plug bad debt holes; on the other, management is cautious about the safety of new assets and dare not touch aggressive businesses to prevent a new round of blowups.
In this context, the only way to maintain positive revenue growth is to squeeze liability and operating costs.
The liability side was the first to undergo an aggressive cost overhaul.
For a long time, Minsheng Bank’s funding costs were among the highest in joint-stock banks. In 2023, its interest-bearing liability cost rate was the highest among listed joint-stock banks.
Such a high-cost structure is more disadvantageous in the current downturn, because it forces you to chase high-yield (and thus high-risk) assets. For asset quality-challenged Minsheng, this aggressive allocation increases the risk of new credit events.
In 2025, Minsheng Bank began slashing liability costs. Its deposit interest rate was forcibly cut to 1.74%, dropping 40 basis points in a year, saving 15.354 billion yuan in annual deposit interest expenses.
In terms of retail and corporate structure, Minsheng abandoned high-rate deposit gathering and turned to scenarios like supply chain finance and payroll, intercepting low-cost corporate demand deposits, while also cutting its interbank liability average cost rate by 46 basis points to 1.81%.
By the end of Q1 2026, personal deposits rose to 1.440724 trillion yuan, maintaining a modest 3.63% growth even amid cost-cutting — proof of the effectiveness of “squeezing out the water”.
At the same time, operational expenses supporting the bank’s daily functions were also compressed.
In 2025, business and administrative expenses dropped 0.61% year-on-year, and the cost-to-income ratio fell to 35.70%.
In Q1 2026, cost-cutting became even more forceful, as business and management expenses for the quarter were compressed to 9.804 billion yuan, and the cost-income ratio plunged to 25.93%.
A nearly 10 percentage point drop in cost-income ratio means drastic cuts to personnel, branches, and back-end spending in normal bank operations.
By year-end 2025, branch numbers fell to 2,389, closing or merging over 70 low-efficiency branches in two years; total employees fell to 61,658, down by 1,832 in a single year.
Additionally, AI is being rolled out on a large scale to replace labor: in 2025, 20.68% of the bank’s code was AI-generated, and 28.9% of IT service roles were replaced by AI.
By reducing staff for efficiency and letting machines take over, the setup and management of physical branches are subject to stricter productivity assessments.
Given Minsheng Bank’s asset quality is not yet fully healed, the era of strict cost control is expected to last for a long time. “Living frugally is the norm,” says Wang Xiaoyong, “and in the future every cent the company spends will be focused on driving key transformation initiatives.”
Attack from Both Sides
Beyond asset quality deterioration, another key reason for Minsheng Bank’s stagnation is that its once-proud micro and small business arm has lost its edge.
As a domestic pioneer in small and micro finance, the bank once gained ample risk premium from this inclusive business. But in the new cycle, interest margins have been squeezed by fierce price wars.
Pricing data for loan issuance reflects this asset-side competition.
In 2025, Minsheng Bank’s inclusive small/micro enterprise loan issuance rate dropped to 3.50%, down 77 basis points in a year; by the first quarter of 2026, it fell further to 3.29%.
This sharp yield drop destroyed the surplus-premium logic for micro/small business, while fierce competition persists in this price band across bank types.
For example, major state-owned banks can win the best micro/small enterprise clients with their lower funding costs at roughly 3% loan rates, while regional city and rural banks use their local networks to dominate the lower markets.
Squeezed on both sides, joint-stock banks hoping to cover high risk with high pricing are gradually losing their base.
Research shows that from 2020-2024, Minsheng Bank’s fastest expansion was in the western, northeast, and some southern cities.
This shows some foresight: when financial institution distribution reaches saturation in advanced regions, expanding breadth in the still-underserved west and northeast enables differentiated competition.
Unfortunately, however, Minsheng’s early investment in lower-tier markets didn’t provide a cushion during downturns.
From 2023-2025, the bank’s revenue and profit contribution from the northeast, central, and western regions was always below average, and even asset quality was just so-so.
A banking compliance expert points out that to do micro/small business lending, interest must cover funding, operating, and bad-debt costs. “Many small business owners have no collateral, or collateral is hard to liquidate, their business is unstable and books are opaque — so this business is high-risk.”
“Big banks are not risk-free,” the expert says, “but first, they can skip overly risky deals; second, their better monitoring, e.g., data + smart risk control, can replace account managers running on-site, and with technologies, even live collateral can now be monitored.”
Against the background of double-digit inclusive lending growth at big state banks, Minsheng Bank’s core micro/small business is struggling.
By the end of 2025, its inclusive micro/small enterprise loan balance grew just 2.25% for the year, and in Q1 2026 by only 1.116 billion yuan — a near standstill, signaling massive client acquisition difficulties in lower-tier markets.
While scale stagnates, risk hasn’t fully receded.
At year-end 2025, the non-performing rate for such loans rose to 1.52%, and by Q1 2026, ticked up slightly to 1.53%.
With falling yields and rising non-performers, micro/small business lending has an obvious corrosive effect on profit. Abandoning scale for scale’s sake and shedding long-tail assets whose risk costs can’t be covered has become Minsheng’s only viable path in the red ocean market.
Rebuilding the Foundation
The failure of the old model forces the bank to pin its hopes for a rebuilt foundation on technological transformation and supply chain finance.
Limited financial resources mean Minsheng’s tech investment is highly pragmatic.
In 2025, IT spending reached 5.627 billion yuan, 3.94% of annual operating revenue, middle of the pack among 17 A-share listed banks disclosing relevant data.
Limited “ammo” means digital transformation cannot go full-scenario, so it heads straight for the core goal: cut costs and boost efficiency.
According to CIO Zhang Bin, in 2025 the company established an AI engineer training and certification system, and created mechanisms for business analysts and smart solution architects to collaborate, shifting from performance integration to co-creation.
Now, Minsheng’s AI is precisely deployed in tasks formerly done by humans: in 2025, 20.68% of code was AI-generated, while AI replaced 28.9% of IT services.
By Q1 2026, over 90% of financial advisors use large AI models every day for solution-writing and client analysis.
While cutting internal costs, the external business logic has also shifted.
For example, at the intersection of corporate banking and micro/small credit, the old-fashioned retail client model has been completely abandoned in favor of deep pursuit of the B-side supply chain ecosystem.
By the end of Q1 2026, the number of direct bank-enterprise links reached 9,962, with a quarterly growth of 8.70%.
The Minsheng e-Home digital platform for micro and small businesses has launched 75 functions, embedding the bank’s loan system in core enterprise ERPs and using real closed-loop data instead of expensive manual due diligence to build new business moats.
At this point, the operating focus of this joint-stock bank is fully clear.
Behind Minsheng Bank’s “revenue up, profit down” contrast is a brutal balance-sheet clean up.
Sharp profit decline is the necessary pain of bomb disposal; only by thoroughly cleaning the balance sheet can Minsheng Bank get back on track.
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