Shandong Banks Post Up to 21.66% Profit Growth
Preliminary 2025 earnings reports from 12 A-share listed Chinese banks highlight a dramatic split between regional leaders and their national counterparts. City commercial banks in economically vibrant regions are demonstrating remarkable resilience. Qingdao Bank led the group with a 21.66% year-over-year increase in net profit, while fellow Shandong-based Qilu Bank posted 14.58% growth. This performance is directly tied to the strength of their local economy, as Shandong's GDP surpassed 10 trillion yuan for the first time in 2025 with 5.5% growth.
The same trend is evident in the Yangtze River Delta, another economic powerhouse. Hangzhou Bank's net profit grew 12.05%, Ningbo Bank's increased by 8.13%, and Nanjing Bank saw an 8.08% rise. These banks benefit from a constant source of high-quality credit demand from the region's advanced manufacturing, digital economy, and specialized enterprise clusters, insulating them from the broader economic slowdown and shrinking net interest margins affecting the wider industry.
Pudong Bank Profit Rebounds 10.52% After Clearing Bad Loans
Among larger joint-stock banks, performance is diverging based on strategy. Pudong Development Bank (SPDB) engineered a significant turnaround, with profits climbing 10.52%. This contrasts sharply with tepid growth at peers like China Merchants Bank (1.21%) and Industrial Bank (0.34%). SPDB’s rebound stems directly from a multi-year effort to clean up non-performing assets accumulated during previous expansion cycles.
By aggressively provisioning for bad loans, the bank absorbed significant losses in prior periods. With the bulk of legacy risks now cleared, the pressure to set aside huge sums for credit losses has eased, allowing profits to recover strongly. This improvement is quantified by its asset quality metrics: by the end of 2025, SPDB’s non-performing loan (NPL) ratio dropped to 1.26%, and its provision coverage ratio—a measure of its buffer against bad loans—strengthened to 200.72%.
Banks Pivot to County Markets, Forcing Niche Strategies
With attractive corporate clients now scarce, larger banks are expanding into previously overlooked territories, a strategy described as "sinking" into county-level markets. This creates intense competition for smaller regional banks, who cannot match the low-cost funding advantages of their national rivals. In this environment, survival depends on leveraging deep local connections and data.
To compete, smaller banks are abandoning the pursuit of large corporate clients and focusing on their home turf. For example, Su'nong Bank, which grew profits by 5.04% while keeping its NPL ratio at a low 0.88%, has achieved this by deeply embedding itself in local textile and manufacturing supply chains. Similarly, Qilu Bank is driving growth by developing specialized credit products for modern agriculture and new residents in county-level areas. This strategic pivot from broad expansion to deep, niche penetration is becoming the definitive path to profitability for China's regional lenders.
Edgen Stock·Mar 09 2026, 20:26