Performance Map Perspective of Banks: Seizing Strong Areas, Deep Cultivation of Counties, and Clearing Existing Stock

The performance reports of listed banks have always been the most sensitive thermometer of the cold and warmth of China’s financial system.

As of March 9, twelve A-share listed banks have intensively disclosed their 2025 performance reports. In this preliminary list, the majority of banks maintain positive growth in net profit attributable to shareholders.

Placed in a broader economic context, the contrast is extremely stark:

In 2025, the banking sector faces an unprecedentedly complex environment. Under counter-cyclical monetary policy adjustments, multiple LPR reductions combined with concentrated adjustments to existing mortgage rates, real and personal financing costs continue to decline, while bond market yields fall unilaterally, greatly limiting returns in financial market business.

On the asset side, local debt restructuring is deep in troubled waters. A large number of high-yield local government financing non-standard assets face interest rate cuts and extensions; property sector is undergoing deep adjustments and traditional balance sheet expansion is essentially blocked. The collision between rigid liabilities and declining asset yields has also put pressure on net interest margins across the industry.

Amidst the chill, why do these "early bird" banks still deliver robust results?

The answer lies beneath the surface of the income statement.

The banking profitability logic has fundamentally shifted tracks; scale worship has lost effectiveness, and the industry has irreversibly entered a highly differentiated "structural era".

These 12 reports are not a microcosm of industry prosperity, but micro samples of banks seeking efficiency from regions, customer groups, and existing assets.

Regional Beta

A bank’s balance sheet is essentially a mirror of the local real economy. In a cycle of weak credit demand, being situated in a vibrant economic heartland is in itself a moat.

Xin Feng noticed that among the twelve listed banks that have disclosed their performance, city commercial banks are leading in profit growth: Bank of Qingdao posted the highest net profit attributable growth at 21.66% year-on-year, followed closely by Qilu Bank at 14.58%.

The high growth of these two Shandong local banks is not accidental financial adjustment or base effect, but is built on an exceptionally solid real economy foundation.

Zeng Gang, Chief Expert at Shanghai Finance and Development Laboratory, told Xin Feng that the strong performance of small- and medium-sized banks in economically active regions is essentially a projection of regional industrial upgrades and structural economic dividends.

Postal Savings Bank researcher Lou Pengfei also pointed out: "Shandong and Yangtze River Delta city and rural commercial banks performed well mainly due to regional economic resilience. Rural commercial banks deeply cultivate their locality, have a good understanding of regional industrial structure and customer needs, and policy support is beneficial to their development."

In recent years, Shandong’s GDP has maintained steady growth, surpassing 10 trillion Yuan for the first time in 2025, with a 5.5% growth rate making it the first northern province to join the "10 trillion club" of major economies.

Xin Feng found that as of the end of 2024, the five-year compound annual growth rate of net profit attributable and total assets of the aforementioned two banks both ranked among the top among listed banks in the north.

Moving the focus south, city commercial banks in the Yangtze River Delta also showed considerable performance resilience:

Hangzhou Bank achieved net profit attributable of 19.03 billion Yuan in 2025, up 12.05% year-on-year; Ningbo Bank achieved net profit attributable of 29.33 billion Yuan, up 8.13% year-on-year; Nanjing Bank achieved net profit of 21.81 billion Yuan, up 8.08%.

The dense specialized and innovative enterprises, mature semiconductor and biomedical industry chains in Jiangsu and Zhejiang provide a continuous stream of credit for local city commercial banks.

Whether it’s Hangzhou’s digital economy and smart manufacturing, or Ningbo’s cluster of specialized and innovative "champion" enterprises, both exhibit order receiving and profitability that withstand the economic cycle.

These highly prosperous micro entities offset traditional industry contraction, drive steady asset expansion, and to some extent support asset-side risk pricing, giving these local banks more strategic depth in the battle to protect net interest margins.

Similar scenes are also reflected in joint-stock banks.

Xin Feng noted that among joint-stock banks, SPDB saw a profit surge of 10.52%, China CITIC Bank recorded a 2.98% increase, while China Merchants Bank and Industrial Bank slowed to 1.21% and 0.34%, and Huaxia Bank experienced negative growth.

This internal divergence reflects that national banks are "consolidating" towards high-prosperity regions:

One of SPDB’s core growth actions is continuing to emphasize the importance of the Yangtze River Delta, such as strengthening top-level design, upgrading the "Yangtze River Delta Integration Demonstration Zone Management HQ" to "Yangtze River Delta Integration Management HQ", coordinating differentiated resource allocation for regional branches.

Meanwhile, a new corporate business blacklist and whitelist has been established, with branches investigating industries and regions, granting full authorization to whitelist clients, gradually clearing blacklisted enterprise businesses, and planning to further improve credit asset quality over three to five years.

Joint-stock Banks Go Downmarket

Compared to city and rural commercial banks, which can fully benefit from local advantages, large national joint-stock banks with bigger assets and broader business face more complex challenges.

If a bank lacks absolute regional industrial dividends, where else can large commercial banks seek profit?

The first answer manifested in the performance report is: seek efficiency from historical stock.

With macro cycles shifting and deepening deleveraging, high-risk assets from rough previous balance sheet expansions have burdened some banks, and today, the speed of clearing these historical burdens directly determines current profit resilience.

Retail asset cleansing cannot be ignored either.

Amid fluctuating household income expectations, rapidly expanding credit card and consumer loan businesses in recent years have seen staged increases in nonperforming rates; some commercial banks chose to proactively shrink high-risk retail exposure, intensify collection and write-off of bad assets.

Take SPDB as an example.

As a representative joint-stock bank in transition waters in recent years, its performance trajectory embodies a "risk resolution bottoming to rebound" logic;

Previous years saw it entering a painful "deep squat period", making bold adjustments through strict asset quality classification in response to bad asset burdens left by earlier business expansion.

For a long time, SPDB had to provision large credit impairment losses to deal with historical bad assets, tremendously eroding current operating profits.

Once growth in new non-performing assets slows and existing risks are essentially cleared, the bank need not use high current profits to fill provisioning holes.

Previously accumulated excess provisioning then becomes a "reservoir" for profit adjustment; even if net interest margin pressure results in stable revenue, stabilized net interest income can be smoothly converted into strong net profit rebounds, showing a typical logic of cyclical bottom reversal.

The 10.52% profit surge is buttressed by comprehensive asset quality improvement—by the end of 2025, SPDB’s NPL ratio has fallen to 1.26%, and provision coverage ratio has risen to 200.72%.

The second answer is: continue to seek incremental gains in downmarket areas.

For instance, SPDB clearly proposed a moderate downward shift in its business network, evidenced in restructuring and absorbing its rural town banks.

After being incorporated into head office, these rural town banks’ risk control models and credit resource allocation capabilities were significantly enhanced, becoming powerful tools for the parent bank in county-level markets.

Wang Xianshuang, an analyst at China Merchants Securities, pointed out that SPDB’s current "five major tracks" of technology, supply chain, and inclusive finance all reflect the company’s transformation strategy of going downmarket and expanding small to medium clients on the corporate end.

Local Banks: Thoroughly Exploiting Regional Advantages

Joint-stock banks can stabilize through shedding historical burdens and retracting to high-prosperity regions, but for more small and medium banks like city and rural commercial banks, the real survival crisis comes from big banks’ "dimensional reduction strike".

With high-quality assets scarce, regional dividends are being rapidly leveled by big banks’ expansion.

Zeng Gang believes that purely locational advantages are fleeting, easily diluted by large financial institutions’ cross-regional expansion.

Especially in credit extended to provincial SOEs, high-quality local government financing, and major infrastructure, price wars are already red-hot.

Big banks leverage low liability costs to offer extremely low loan rates to premium clients. If small banks blindly follow this price war, their net interest margin risks being wiped out.

In response, Lou Pengfei believes "thoroughly exploiting local advantages" is the trend for small banks, as large banks use their funding cost advantage to go downmarket, small banks must leverage close relationships and local ties to deeply cultivate county-level markets.

Zeng Gang also said small banks need to systematically distill the non-standard "soft information" obtained through long-term local roots into high-barrier indigenous risk pricing models, upgrading from a single capital provider to a comprehensive local financial ecosystem service provider.

Actively giving up head-on competition and solidifying downmarket customer groups becomes the only choice for breakthrough.

In 2025, SuNong Bank's net profit attributable grew 5.04% year-on-year, NPL ratio dropped to 0.88%;

This is the result of its grid-marketing strategy, deeply integrated into local textile and equipment manufacturing SME supply chains, precisely grasping real business conditions and converting long-tail customers unreachable by big banks into quality assets.

When Qilu Bank maintained 14.58% profit growth, its low NPL was also controlled at 1.05%;

Behind this, the bank took county-level finance as the core engine driving scale and profit, creating modern agriculture and new-citizen exclusive county credit products, with county loans outpacing overall growth for consecutive years.

But Zeng Gang also emphasized, going downmarket is not rough expansion.

“Grassroots customer groups often lack standard collateral, financial institutions must establish product matrices highly tailored to local realities, differentiated credit mechanisms, and agile post-loan management systems, using refined operations to offset credit risk associated with going downmarket,” Zeng Gang said.

Defense in Weak Regions

It must be admitted that there’s always survivor bias under the spotlight of capital markets.

Many listed banks that haven’t issued performance reports may have real results far below market expectations;

And outside the dazzling A-share stage, numerous unlisted small banks and grassroots financial institutions in weak regions are facing extremely severe survival challenges.

When regional beta is no longer a dividend, small banks lacking endogenous blood-making ability no longer face profit assessment but the baseline defense of survival.

To this, Lou Pengfei argues "small banks in regions with weak economies need to shift from pursuing scale expansion to a ‘small but beautiful’ community bank positioning, vigorously develop intermediary business, use technology to enhance risk control, and optimize resource allocation through regional integration."

At the operational level, these institutions are showing pragmatic defensive stances.

First, completely abandon the fantasy of being an all-round bank, focus on single-point breakthrough.

In declining industrial areas, banks can only extremely concentrate limited credit resources on the only remaining local specialty industries and supply chains—for example, city commercial banks in resource-rich provinces serve only large coal and nonferrous enterprises, agricultural provinces are entirely bound to leading agribusinesses.

Zeng Gang said such small banks’ primary strategy is extreme market segmentation focus, precisely targeting specific specialty advantage industries or supply chain nodes, building vertical specialized financial service barriers, and forming differentiated competition.

Second is extreme cost reduction to maintain the survival baseline.

To avoid negative net interest margin, banks forcefully cut high-cost term deposits, refuse to absorb expensive long-term funds in exchange for a lighter liability structure, and cut inefficient remote branches and redundant personnel en masse, lowering the cost-to-income ratio.

To this, Zeng Gang suggests small banks use financial technology for lightweight management upgrades, make up for technology investment deficiencies, and enhance control effectiveness.

Third is forming alliances to build the final line of defense.

When a single institution can't absorb regional credit risk shocks, administrative restructuring frequently occurs. In many places, provincial rural commercial banks are being listed, provincial associations are deepening reforms, forming unified legal entities from struggling grassroots entities, using bigger balance sheets to hedge local risk outbreaks.

Zeng Gang said actively seeking market-driven mergers is an important option for risk resolution and breakthrough—achieving "quality improvement by quantity reduction" through integration, completing the shift to quality and efficiency driven strategies.

It is worth noting that these 12 reports are just the tip of the iceberg.

The era of lying flat on monopoly licenses is over; in the era of stock economy, the future bank ecosystem is extremely pure:

Either deeply bind to the real economy in strong regions for certain dividends;

Or, undergo painful restructuring and rebirth in pressured regions, seeking survival through extreme cost reduction and efficiency improvement.

In stock market competition, fine asset pricing ability, sharp downmarket risk control models, and historical risk identification that penetrates cycles will become the only pass for every financial institution in this era of folding.

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