2025 Bank Annual Report Observation Room | Real estate non-performing loans on the rise, Jinshang Bank's "report card" shows mixed results

Ask AI · What regional economic factors lie behind the surge in non-performing loans in the real estate sector?

During the bank earnings disclosure season, Jinshang Bank, Shanxi Province’s only provincial-level legal-person Hong Kong-listed city commercial bank, finds its 2025 “report card” mixed. On one side is a scale growth story: total assets surpassing 393 billion yuan and steadily expanding. On the other side is an operating predicament: for two consecutive years, both revenue and net profit attributable to shareholders have declined (“double decreases”), while both non-performing loans and the non-performing loan ratio have risen (“double increases”). The local bank rooted in the land of Jinzhong is now in a balancing period between expanding scale and sliding returns, as well as between growth momentum and rising risk pressure.

Revenue and net profit attributable to the parent both decline

Based on the performance statements, in 2025, Jinshang Bank’s asset size continued to expand steadily. By year-end, its total assets exceeded 393 billion yuan, up 4.4% from the end of the previous year, delivering stable growth and an increasingly solid “base.” However, contrasting with this scale expansion is the fact that operational concerns remain. For the full year of 2025, Jinshang Bank recorded operating income of 5.445 billion yuan, down 6% year-on-year. Net profit attributable to the bank’s equity holders was 1.665 billion yuan, down 5.1% year-on-year. This marks a second consecutive year in which both revenue and net profit attributable to the parent have shown the “double decline” trend.

As for net interest income—the core source of bank revenue—there was a contraction in 2025. In the industry cycle in which interest rate marketization deepens and the Loan Prime Rate (LPR) continues to adjust, Jinshang Bank’s average yield on interest-earning assets fell from 3.37% at the end of 2024 to 2.97% at the end of 2025, a drop of 0.4 percentage points. Its net interest margin decreased by 0.13 percentage points from 1.20% to 1.07%. Its net interest spread narrowed from 1.07% to 0.96%. The continuing compression of the interest spread drove net interest income to fall 7.7% year-on-year to 3.866 billion yuan, becoming a main factor dragging performance.

Traditional intermediary business was also weak and failed to provide effective performance support. Against the industry backdrop of accelerated wealth management transformation and sharply intensified competition for non-interest income, in 2025 Jinshang Bank’s net fee and commission income was about 6.2 billion yuan, a slight year-on-year decrease of 1.1%. Settlement and clearing fees, acceptance and guarantee fees, and card service fees each fell year-on-year by 21.5%, 19.9%, and 16.5%, respectively. Only agency business fee and other income increased by 49.4%, and wealth management service fees increased by 3.1%.

Jinle Function analyst Liao Hekai pointed out that during the interest rate decline cycle, the core challenge for Jinshang Bank in managing liability costs and optimizing asset yields lies in the fact that the decline in the average yield of interest-earning assets is greater than the decline in the average interest rate paid on interest-bearing liabilities. This leads to a narrowing net interest spread. At the same time, reduced bargaining power in corporate lending and further exposure to real estate risk additionally weigh on profitability, causing cost adjustments on the liability side to lag behind the decline in asset-side yields.

In the view of Wang Hongying, Director of the China (Hong Kong) Financial Derivatives Investment Research Institute, Jinshang Bank’s current operating challenges mainly come from two aspects. On one hand, under intense market competition, costs on the liability side remain high—whether it is maintaining personal deposit gathering or maintaining corporate business comes with high costs. On the other hand, intensified competition for high-quality corporate clients has pushed loan pricing on the asset side downward, and the continuing narrowing of the net interest spread is further squeezed by rigid cost-control measures, compressing profit space even more.

Real estate sector non-performing loans surge

Asset quality is a bank’s “lifeline.” Jinshang Bank’s asset quality is deeply tied to the Shanxi regional real estate market and to real-economy sectors such as energy and manufacturing, making it especially sensitive to industry cycles and regional economic conditions. By the end of 2025, Jinshang Bank’s total non-performing loan (NPL) amount reached 4.249 billion yuan, up 683 million yuan from the previous year. The non-performing loan ratio rose from 1.77% by 0.18 percentage points to 1.95%.

A look at the structure of the bank’s corporate non-performing loans shows that in 2025, the NPL ratios in sectors such as manufacturing, mining, and construction improved somewhat, but real estate risks accelerated in exposure. By the end of 2025, Jinshang Bank’s non-performing loan ratio in the real estate sector soared to 12.24%, up sharply from 0.36% a year earlier. The NPL balance jumped from about 0.32 billion yuan to 12.55 billion yuan, an increase of more than 38 times. Jinshang Bank stated that the rise in NPL balances and the NPL ratio in this sector was due to the ongoing adjustment of the overall real estate market, which weakened some property developers’ debt repayment capacity. This led to operational difficulties and, ultimately, loan defaults.

Yan Yuejin, Deputy Director of the Shanghai E-House Real Estate Research Institute, said that judging from the timing of risk exposure and regional characteristics, Jinshang Bank’s real estate loan risks gradually became apparent in later stages, reflecting that there is some lag in risk identification and classification. When the regional real estate market has already entered an adjustment cycle, asset quality does not change immediately in tandem, but is released gradually in later phases—indicating there is still room to further optimize risk early-warning mechanisms and post-loan dynamic tracking capabilities.

Yan Yuejin suggested that given the above situation, the priority for subsequent risk disposal could consider first strengthening continuous attention to large exposures to risk, especially conducting prudent reviews of real estate credit granting clients with higher relatedness, to prevent the spread of risk from a single client or a group. At the same time, the bank could make comprehensive use of methods such as write-offs, transfers, and restructuring to steadily advance the disposal of loans with exposed problems, thereby better promoting the prevention and resolution of risks.

In the face of risk challenges, Jinshang Bank is speeding up risk disposal and improving its system. It has built a “big credit” management framework covering the entire process of “pre-loan, during-loan, and post-loan.” It has formulated risk-disposal plans with multiple measures. In 2025, it recovered and disposed of 2.15 billion yuan of non-performing assets. By introducing external big data such as business information and judicial litigation into the credit management system, it has built intelligent risk-control rules to intercept high-risk clients and improve risk identification capabilities as well as risk decision-management efficiency. Applying the concepts of digital intelligence management, the bank is rebuilding its post-loan management functions—iterating from a mainly human-driven model to a more intelligent post-loan management model—and promoting a digital transformation of its post-loan management mechanism.

How to “stop the bleeding” and transform

Jinshang Bank’s headquarters is located in Taiyuan, Shanxi. On December 30, 2008, it was approved by the former China Banking Regulatory Commission to be renamed from Taiyuan City Commercial Bank. It officially started operations and was listed on February 28, 2009, and was listed on the Hong Kong Stock Exchange on July 18, 2019.

Under dual pressure from both performance and risk, Jinshang Bank has begun optimizing its asset structure through measures such as the disposal of non-performing assets. It is also closely aligned with the main line of high-quality development, stepping up efforts in serving the real economy, promoting inclusive finance, and advancing retail transformation and digital construction.

According to figures disclosed in its annual report, in 2025 the bank cumulatively provided loan support of 1483 billion yuan to the real economy in Shanxi Province. Achievements in inclusive finance are notable. As of the end of last year, the outstanding balance of inclusive small and micro enterprise loans reached 134.7 billion yuan, with a loan growth rate of 16.6%. In the area of digital transformation, it has built and improved online service platforms including the comprehensive corporate business service platform, the small and micro comprehensive financial service platform, the retail customer operation platform, the integrated remote service and marketing platform, and the Personal Mobile Banking 7.0 platform, to conduct customer outreach and carry out work such as online operations and remote services.

“Jinshang Bank needs to adopt multi-dimensional response strategies to follow a differentiated development path,” Wang Hongying advised. In terms of risk disposal, priority should be given to stopping extensions for loans to real estate enterprises with high leverage, using asset restructuring or rapid asset liquidation to “stop the bleeding.” It should also seize policy opportunities to promote project mergers and acquisitions or convert projects into affordable rental housing to stabilize asset quality. In terms of business structure, reliance on traditional manufacturing and real estate should be reduced, shifting toward technology, green finance, and supply-chain finance, and supporting Shanxi’s high-quality industrial development through “investment-loan linkage.” In terms of risk-control philosophy, it is necessary to shift from passive response to proactive management, combining industry cycles to provide comprehensive financial service solutions. In terms of operational support, digital transformation should be accelerated, using data simulation of the enterprise full lifecycle to reduce costs and improve efficiency.

“Going forward, Jinshang Bank should prioritize accelerating the liquidation of high-risk assets, while simultaneously optimizing the credit structure to tilt toward manufacturing and the green economy, and achieving risk management by relying on a digital risk-control platform,” Liao Hekai said.

Regarding relevant issues such as how to further improve its profitability and improve asset quality, a reporter from Beijing Business Daily sent an interview outline to Jinshang Bank, but as of the time of publication it had not yet received a response.

Beijing Business Daily reporter Song Yitong