Dongguan Rural Commercial Bank’s net profit has declined for three consecutive years, with structural differentiation in asset quality becoming apparent | Financial report anomaly spotlight

Our newspaper (chinatimes.net.cn) reporter Fu Le, intern reporter Lin Jiazhu, Beijing report

On March 27, Dongguan Rural Commercial Bank released its 2025 annual performance report.

During the reporting period, the bank’s asset size steadily expanded to nearly 800 billion yuan, while profitability remained under pressure, with net profit attributable to the parent declining for three consecutive years, and operating income contracting for two years in a row. In terms of asset quality, there was a structural divergence: improvements in corporate assets and pressure on retail assets, with personal loan non-performing rates rising and credit card non-performing rates surpassing 11%. Capital adequacy indicators marginally weakened, and operational management faced multiple challenges.

On April 2, Huaxia Times reporter sent an inquiry to Dongguan Rural Commercial Bank regarding related operational issues, but had not received a reply as of press time.

Revenue and net profit decline consecutively

In 2025, Dongguan Rural Commercial Bank exhibited a divergence pattern of steady scale expansion and continuous decline in profitability.

According to the annual report, as of the end of 2025, the bank’s total assets reached 796.016 billion yuan, a year-on-year increase of 6.72%; various deposit balances totaled 544.212 billion yuan, and various loan balances were 409.031 billion yuan, maintaining growth in deposit and loan business scale.

In terms of profitability, the bank’s operating income and net profit continued to decline. In 2025, the bank achieved operating income of 11.697 billion yuan, down 5% year-on-year; net profit attributable to the parent was 3.854 billion yuan, down 16.67% year-on-year. Looking at the longer timeline, the bank’s net profit attributable to the parent has decreased year-on-year for three consecutive years since 2023, and operating income has contracted for two consecutive years.

It is noteworthy that the core reason for performance pressure stems from the dual drag of narrowing interest spreads and non-interest income. In 2025, the bank’s net interest income was 8.827 billion yuan, down 3.78% year-on-year, mainly affected by the decline in LPR, loan re-pricing concentration, and financial benefits to the real economy. Customer loan interest income decreased year-on-year, coupled with shrinking financial investment income, leading to total interest income of 19.958 billion yuan, a decrease of 1.964 billion yuan from the previous year. As a result, the average yield on interest-earning assets fell from 3.23% to 2.82%, a year-on-year decrease of 0.41 percentage points; net interest margin narrowed to 1.25%, and net interest spread dropped to 1.19%, with the narrowing of the spread continuously suppressing profitability.

Non-interest income also declined simultaneously, further intensifying profit pressure. In 2025, the bank’s non-interest net income was 2.869 billion yuan, down 8.55% year-on-year. Among them, net fee and commission income was 399 million yuan, down 12.71%, mainly affected by lower fee rates on wealth management products and reduced fee income from bank cards and settlement services; net trading gains were 579 million yuan, decreasing by 1.268 billion yuan year-on-year, mainly impacted by the phased rebound of bond market interest rates and fluctuations in the fair value of trading financial assets.

To cope with profit pressure, the bank actively promoted cost control and implemented measures to reduce costs and increase efficiency. In 2025, operating expenses were 4.624 billion yuan, down 2.71% year-on-year; employee expenses were 2.893 billion yuan, down 5.39%. Senior management compensation was also reduced accordingly, with Chairman Lu Guofeng and President Fu Qiang both earning pre-tax salaries of 1.844 million yuan in 2025, a decrease of 386,000 yuan from the previous year, a reduction of 17.3%.

Bohong Consulting’s chief analyst of the financial industry, Wang Pengbo, told Huaxia Times that the divergence between scale and efficiency is mainly due to the continuous narrowing of interest spreads, rigid liability costs, and declining asset pricing, combined with some institutions still following traditional scale-driven approaches, emphasizing quantity over quality in credit issuance and customer expansion, further lowering asset yields.

Wang Pengbo suggested that regional rural commercial banks should appropriately slow down extensive expansion, focus on local customers, optimize asset structure, reduce high-cost deposits, strengthen refined pricing and cost management, and improve unit asset returns.

Lou Feipeng, researcher at China Postal Savings Bank, told Huaxia Times that the downward shift of the interest rate center has pushed the banking industry into an era of low interest rates, low interest spreads, and low fee rates, making the operating environment for small and medium-sized banks severe. Some banks maintain scale through asset expansion, but net interest income declines. Rural commercial banks should abandon the purely scale-expansion mindset, deepen local markets, optimize asset-liability structures, strengthen liability cost control, and vigorously develop non-interest income to achieve high-quality development with balanced volume and price.

Structural divergence in asset quality

Asset quality shows significant structural divergence, with Dongguan Rural Commercial Bank exhibiting improvements in corporate assets and pressure on retail assets.

As of the end of 2025, the non-performing loan ratio of Dongguan Rural Commercial Bank was 1.79%, a slight decrease of 0.05 percentage points year-on-year, with overall indicators slightly optimized; among them, the corporate loan NPL ratio was 1.51%, down 0.3 percentage points year-on-year, reflecting effective risk control in the corporate sector.

Retail loans became the main drag on asset quality, with risk concentration exposed. The personal loan non-performing rate rose from 2.29% to 2.85%, an increase of 0.56 percentage points year-on-year. Among specific products, credit card overdraft non-performing rate increased to 11.03%; personal consumer loans and personal business loans also saw rising non-performing rates, with retail asset quality under pressure across the board.

In terms of business scale, the growth momentum of personal loans significantly weakened. By the end of 2025, balances of personal business loans and personal consumer loans decreased by 4.4% and 1% respectively year-on-year, with only mortgage loans growing slightly by 4.64%. Retail business faces dual pressures of growth and risk control.

Additionally, capital adequacy levels declined, and capital replenishment pressure increased. As of the end of 2025, the bank’s capital adequacy ratio was 15.41%, down 1.13 percentage points year-on-year; the core Tier 1 capital adequacy ratio was 13.30%, down 1.04 percentage points. Both core capital indicators continued to decline, though still above regulatory minimums, the issue of accelerated capital consumption and increased external replenishment pressure gradually became apparent. Meanwhile, the provision coverage ratio was 207.68%, at a relatively low level in recent years, reducing the buffer space for risk mitigation.

Wang Pengbo pointed out to Huaxia Times that the retail risk exposure of such regional banks mainly stems from four issues: first, deep customer segmentation, with insufficient credit recognition and repayment capacity assessment for long-tail local clients; second, relatively simple risk control models and data dimensions, heavily relying on traditional credit data and lacking multi-scenario behavioral data support; third, weak monitoring during the loan process and post-loan collection capabilities, with low risk response and disposal efficiency; fourth, under intensified industry competition, some institutions have loosened access standards to expand business, leading to gradual risk exposure.

Wang Pengbo suggested that retail risk control for regional banks should integrate internal credit reports, transaction flows, and scenario-based trading data, improve localized retail risk models, and enhance customer risk differentiation; implement differentiated credit strategies, strictly control high co-debt and high leverage clients; strengthen full-process post-loan management, establish early warning mechanisms, and promptly dispose of overdue assets.

Lou Feipeng recommended that small and medium-sized banks should strengthen data governance, optimize risk models and approval strategies; enhance post-loan monitoring and third-party channel management; accelerate the disposal of existing non-performing assets through write-offs and transfers to clear risks more quickly.

Edited by Feng Yingzi | Editor-in-chief: Zhang Zhiwei