Zhengzhou Bank rebounds from the bottom, but the lingering real estate "old wounds" continue to weigh it down

March 30, Henan’s only A+H listed city commercial bank, Zhengzhou Bank (002936.SZ), released its 2025 annual report, turning in an operating performance characterized by a rebound from the bottom with a mix of good and bad.

01

Rebound in scale, but an imbalanced structure

As of the end of 2025, Zhengzhou Bank’s total assets reached RMB 743.67B, up RMB 67.3094 billion from the beginning of the year, an increase of 9.95%. The growth rate hit a new high since 2018. Of that, total loans were RMB 410.26B, up 5.82% from the beginning of the year; total deposits were RMB 463.08B, up 14.47%. The drivers of scale expansion recovered significantly, and the foundation on the liability side was continuously strengthened.

In terms of operating performance, in 2025 the bank recorded operating income of RMB 12.92B, up 0.34% year over year; attributable net profit was RMB 1.9B, up 1.03% year over year. It completely put an end to the prior two consecutive years of year-on-year declines in operating income and profit deterioration. Against the backdrop of narrowing net interest margins and profit pressure across the industry, it achieved a stabilization and repair of its fundamentals.

Asset quality and cost control also showed an improving trend. The non-performing loan ratio fell to 1.71%, down 0.08 percentage points from the beginning of the year, maintaining a downward trend for three consecutive years. The allowance coverage ratio rose to 185.81%, up 2.82 percentage points from the beginning of the year, with risk coverage capacity continuing to strengthen. The cost-to-income ratio fell to 27.67%, down 1.28 percentage points year over year, well above the 35% regulatory red line. Key regulatory indicators remained within a safe margin. Overall data validates this stage’s “comeback,” but behind the striking total figures there are still structural risks and long-term challenges that cannot be ignored.

The quality of this set of results is hidden in the transformation and adjustment of its business structure. In recent years, Zhengzhou Bank has taken retail transformation as the core breakthrough for high-quality development, focusing on building four key-account concierge service systems, with transformation results gradually becoming visible.

In 2025, the bank’s retail banking business income reached RMB 1.72B, increasing its share of operating income to 13.32%, up 2.34 percentage points from 2024. Among them, personal deposit business performed especially well: at year-end, the balance of personal deposits reached RMB 271.85B, up 24.60% year over year, and their share of total deposits rose to 58.7%, becoming the most stable source of funding on the liability side. The balance of personal consumer loans first exceeded RMB 20 billion, with a growth rate of 20.9%. Inclusive small and micro loans were RMB 57.33B, up 6.78% from the beginning of the year. The customer base and service coverage for retail business continued to expand.

The wealth management track also accelerated. At the end of 2025, the scale of retail wealth-related financial assets reached RMB 57.25B, up 11.57% from the end of the previous year. Year over year, intermediary wealth management fee income grew 86.11%. The bank introduced 675 agency-distribution products throughout the year, building a full-spectrum product system and breaking away from the traditional extensive operating model of city commercial banks.

At the same time, Zhengzhou Bank remained committed to serving the local economy and worked hard to implement the “five major articles” of financial development. By the end of 2025, its technology loan balance was RMB 33.24B, up 25.57% from the beginning of the year; and its digital economy loan balance was RMB 6.75B, up 27.78% from the beginning of the year. The growth potential of its distinctive tracks was gradually released.

What cannot be ignored is that Zhengzhou Bank’s income structure still has clear shortcomings. In 2025, non-interest income was RMB 2.06B, down 18.13% year over year, and its share of operating income fell to 15.92%. Among them, net fee and commission income declined 13.95% year over year, and there remains considerable room for improvement in the bank’s ability to generate revenue from fee-based businesses.

More critically, its net interest margin continued to narrow. In 2025, the bank’s net interest yield was 1.61%, down 0.11 percentage points from the prior year. Compared with the peak in 2021, it has cumulatively fallen by 70 basis points. This directly dragged down its profitability. As a result, in 2025, ROA and ROE stopped declining and stabilized, but they still remain far below both the prudential regulatory standards and the industry average. The foundation for profit recovery is still not solid.

02

Non-performing loans not fully cleared and governance dilemmas

Besides shortcomings in its business structure, Zhengzhou Bank still faces dual tests: resolving legacy burdens and dealing with corporate governance issues. Although the overall non-performing loan ratio has continued to decline, structural risks have not been fully cleared. The historical legacy issues in real estate loans remain the biggest drag.

From 2018 to 2021, Zhengzhou Bank had expanded its real estate credit aggressively. Loan balances rose from RMB 18.1B to a peak of RMB 34.44B. As the industry downturn emerged, related risks were quickly exposed. The non-performing loan ratio in the real estate sector jumped from 1.25% in 2020 to 9.55% in 2024.

Although over the past three years the bank has cumulatively reduced its real estate loan scale by nearly RMB 10 billion, and in 2024 it also transferred a large amount of non-performing assets with a book balance of RMB 15.01B, pushing forward risk clearance efforts with full force, as of the 2025 interim report, the bank’s non-performing loan ratio for the real estate sector was still as high as 9.75%, with non-performing loan balances of RMB 2.06B. The resolution of stock risks still requires a longer cycle.

Alongside asset risk is frequent instability among the core management team. Since 2025, three deputy general managers and three assistant general managers have successively resigned, and the core management team once experienced a gap. In February 2026, Li Hong, the president who had served for only one year and three months, resigned for personal reasons. Her hurried departure not only raised market concerns about the stability of corporate governance, but may also cause the bank’s strategic exploration under its distinctive positioning to wobble, affecting the continuity of long-term transformation.

Meanwhile, continuing declines in capital adequacy ratios also plant hidden risks for future development. As of the end of 2025, the bank’s core tier-one capital adequacy ratio was 8.45%, only less than 1 percentage point above the 7.5% regulatory red line. The continuous expansion of its asset scale has led to continuous capital consumption. If the level of internally generated profitability cannot be improved effectively, the bank will face significant pressure from refinancing going forward.

03

Industry shifts and transformation challenges

From the perspective of industry development, Zhengzhou Bank’s transformation and challenges are a snapshot of the current survival situation of domestic regional city commercial banks.

In 2025, commercial banks’ net interest margins generally fell to a historical low of 1.42%. City commercial banks’ overall net interest margin was 1.37%. Although there are signs of stabilization, the industry is still in a cycle where net interest margins are narrowing, “asset supply shortages” are intensifying, and differentiation is continuing to widen. Relevant research notes point out that the core momentum for net interest margin recovery in the future will come from reducing costs on the liability side. This also means that whether the bank can optimize its liability structure and stabilize its funding costs will be the key for city commercial banks to break through.

From this angle, Zhengzhou Bank’s continued increase in the share of personal deposits aligns well with the industry’s core trend of transformation. This sets a solid foundation for optimizing funding costs and stabilizing and repairing net interest margins going forward.

As a local corporate bank rooted in Henan, Zhengzhou Bank’s core value lies even more in its irreplaceable geographic advantages. Henan’s 2025 provincial GDP has already exceeded RMB 6 trillion, bringing massive local financial demand for urbanization progress and upgrading of industrial chains. As the bank serves as Henan’s policy-oriented science-and-technology finance operating entity, in connecting with major projects within the province and clusters in advanced manufacturing industrial chains, it has inherent advantages in local resources. Early layout of distinctive tracks may also help it cultivate a sustainable second growth curve.

To truly achieve the shift from “bottoming out and stabilizing” to “high-quality leaps,” Zhengzhou Bank still needs to solve three core issues: continuously advance the clearance of existing stock risks, thoroughly clear non-performing loan burdens in areas such as real estate; promptly complete the core management team, stabilize the direction of strategic execution, improve the corporate governance structure, and rebuild market confidence; broaden channels for internal and external capital replenishment, continuously optimize the income structure, enhance the level of internally generated profitability, and ease capital pressure.

For Zhengzhou Bank, 2026 is a key year for its transformation and breakthrough. Only by holding on to its local advantages, deeply cultivating a differentiated positioning, and finding long-term balance between scale growth and risk control can it stand firm amid the wave of differentiation among city commercial banks and truly achieve long-term steady and sound development.

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