Difficulty swallowing and pain; Shanghai Bank's provisions dwindled by nearly 47 percentage points in six months.

On August 27, Shanghai Bank released a report showing that it maintained revenue growth and stabilized net interest margin.

However, a closer look at the financial data reveals that the bank is facing the challenge of balancing the expansion of corporate lending with the clearing of risks associated with existing real estate assets.

According to the profit and loss statement, Shanghai Bank achieved operating revenue of RMB 28.842 billion in the first half of the year, a year-on-year increase of 5.48%; and net profit attributable to the parent company of RMB 13.299 billion, a year-on-year increase of 0.51%.

The core driver of revenue growth came from net interest income, which reached RMB 17.665 billion, a year-on-year increase of 7.37%.

This growth stemmed from proactive corporate lending on the asset side: as of the end of the reporting period, total customer loans and advances reached RMB 1,528.765 billion, an increase of 6.10% compared to the end of the previous year. Among them, corporate loans and advances increased by 11.43% to RMB 957.241 billion, while personal loans and advances increased by only 1.26%, and bill discounting decreased by 8.69%.

Against the backdrop of narrowing net interest margins across the industry, Shanghai Bank's net interest margin remained at 1.15% during the reporting period, unchanged year-on-year.

However, this is not due to a stabilization in asset yields, but rather stems from a decline in liability costs:

The average yield on interest-earning assets fell 38 basis points year-on-year to 2.53%, with the average yield on loans and advances being only 2.94%; the average interest rate on interest-bearing liabilities fell 34 basis points to 1.42%, with the interest rate on deposits falling 39 basis points to 1.23%.

Against the backdrop of overall declining asset yields, coupled with the increase in the proportion of corporate loans, banks' asset returns continue to be under pressure; if the room for further reduction in deposit rates is limited in the future, the net interest margin defense line may face a test.

More noteworthy are the changes in asset quality and risk resilience indicators.

The non-performing loan ratio rose to 1.42% at the end of the reporting period, an increase of 0.24 percentage points from the end of the previous year. The balance of non-performing loans was RMB 21.737 billion, an increase of RMB 4.74 billion from the end of the previous year. The company's non-performing loan ratio rose from 1.35% to 1.66%.

The official explanation is that the downgrading of certain existing real estate and construction clients is due to the impact of industry cycles, indicating that the risks of corporate real estate and related industrial chains that were delayed in the early stages are entering a period of concentrated clearing.

In order to maintain positive profit growth amid rising non-performing loans, Shanghai Bank adjusted its provision retention strategy—the provision coverage ratio decreased by 46.69 percentage points from 244.94% at the end of 2025 to 198.25%.

Meanwhile, credit impairment losses of RMB 6.028 billion were accrued in the first half of the year, representing a year-on-year increase of 20.78%.

In terms of forward-looking indicators, although the proportion of loans under special mention (1.77%) and the overdue loan rate (1.50%) have decreased compared to the end of last year, the migration rate of loans under special mention has decreased from 28.56% at the end of 2025 to 25.93%. Although it has declined, it is still at a relatively high level, indicating that the channel for the transformation of existing hidden risks into non-performing loans still exists.

While interest income relies heavily on corporate business, non-interest income shows internal differentiation: net fee and commission income from intermediary business decreased by 10.20% year-on-year to RMB1.85 billion, and its share of revenue shrank to 6.41%.

Other non-interest net income reached RMB 9.327 billion, a year-on-year increase of 5.62%, accounting for 32.34% of revenue, mainly due to trading gains from the bond market.

In addition, the performance of its comprehensive operating licenses showed a divergence: Shanghai Bank Wealth Management's product scale increased to RMB 446.089 billion, and it achieved a net profit of RMB 127 million in the first half of the year; Shanghai Bank Fund's public fund management scale reached RMB 265.305 billion, and it achieved a net profit of RMB 170 million in the first half of the year.

Meanwhile, its subsidiaries, Minhang Shangyin Rural Bank and Quzhou Qujiang Shangyin Rural Bank, suffered losses of 3.044 million yuan and 8.5028 million yuan respectively, highlighting the pressure of consolidation in the county-level financial sector.

Overall, Shanghai Bank is currently adjusting its asset structure towards corporate banking, technology and green sectors, while also addressing existing non-performing real estate assets.

The control of non-performing loan generation and the rate of provision depletion in the following quarters will remain the focus of market attention.

Risk Warning and DisclaimerInvesting involves risk; please exercise caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Any investment decisions made based on this information are at your own risk.