Default rate 0.94%, how does Zhangjiagang Bank manage to navigate through the interest rate spread cycle?

Ask AI · How does Zhangjiagang Bank’s micro and small business strategy achieve low non-performing rates and high returns?

Steady operations and high-quality assets provide a solid foundation for shareholder returns.

Produced by | Zhongfang Network

Reviewed by | Li Xiaoyan

On March 30, Zhangjiagang Bank (002839) released its 2025 annual performance report. Against the backdrop of continuous narrowing of net interest margins and industry-driven growth momentum shifts in the banking sector, this rural commercial bank deeply rooted in county areas delivered an annual report card characterized by “stability first, quality and efficiency improvement, structural optimization”: achieving an operating income of 4.75B yuan and net profit attributable to the parent of 1.98B yuan for the year, with year-on-year increases of 0.75% and 5.35%, respectively, highlighting its profitability resilience; asset quality has maintained an excellent industry level for many years; dividend payout ratio has steadily increased; non-interest income has accelerated growth, demonstrating long-term development confidence under the “small and scattered” strategy.

By 2025, the domestic banking industry generally faces multiple challenges such as weak demand, intensified competition, and declining interest rates. Although Zhangjiagang Bank’s revenue growth has slowed, profit growth remains steady, with net profit increasing significantly faster than revenue, reflecting ongoing improvements in internal operational efficiency.

In terms of scale, the bank’s total assets reach 227.24B yuan, with total loans of 148.36B yuan, up 8.04% year-on-year. Both loans and deposits expand in a balanced manner, with a solid core scale base. On the profit side, despite a 10.16% year-on-year decline in net interest income to 3.04B yuan, net profit attributable to the parent still grew by over 5%, thanks to cost control, risk optimization, and support from non-interest income.

On the cost side, the bank’s refined management has achieved notable results: operating and management expenses of 1.68B yuan, down slightly by 0.26% year-on-year; cost-to-income ratio of 35.43%, optimized by 0.36 percentage points year-on-year, below the industry average, leaving room for profit growth through expense control. Meanwhile, the weighted average return on equity (ROE) reached 10.36%, consistently staying above 10%, creating stable value for shareholders.

Since establishing the “small and scattered” strategy in 2017, Zhangjiagang Bank has always focused on small and micro enterprises and agricultural-related fields. Currently, loans to agriculture and small micro enterprises account for over 91%, forming a differentiated inclusive finance path. Although this strategy faces short-term pricing pressure, it builds long-term risk diversification and rootedness in the real economy.

Asset quality is the bank’s biggest highlight. By the end of 2025, the non-performing loan (NPL) ratio was only 0.94%, stable below 1% for five consecutive years, ranking second lowest among listed banks in A-shares alongside China Merchants Bank; the loan loss reserve coverage ratio was 328.87%, demonstrating strong risk buffer capacity, far exceeding regulatory requirements. The “low NPL, high provisioning” high-quality asset structure results from the natural risk diversification of the “scattered” approach, as well as precise implementation of the “risk control factory” model, digital empowerment, and layered disposal systems.

In the face of competition from large banks expanding into county markets, the bank adheres to a small and dispersed client positioning, actively exits high-risk and low-efficiency customers, and focuses resources on high-quality inclusive fields such as technology finance and green finance. By 2025, loans to tech enterprises and green loans grew by 17.32% and 26.05%, respectively, optimizing the asset structure toward high-growth, low-risk areas, laying a foundation for long-term returns.

Net interest margin has narrowed to 1.39%, a common industry challenge and a short-term growth pain point for Zhangjiagang Bank. However, the bank proactively responds by adjusting asset, liability, and income structures, actively hedging against margin pressure, with transformation results gradually emerging.

Liability-side cost control has shown remarkable results. In 2025, the average cost of interest-bearing liabilities dropped sharply by 37 basis points to 1.79%. By closely monitoring interbank pricing, reducing high-cost long-term deposits, and expanding low-cost settlement funds, the bank effectively alleviates the impact of declining asset yields. Meanwhile, deposit balance reached 177.87 billion yuan, up 6.75% year-on-year, with core liabilities stable, highlighting advantages in local channels.

On the asset side, the bank actively adjusts its structure: increasing allocations to high-yield areas such as corporate, technology, and green finance, with corporate loans (excluding discounts) growing by 13.1%; simultaneously shrinking low-yield bill discounts, whose growth rate sharply fell from nearly 70% to 6.14%, strengthening overall asset yield resilience.

Even more impressive is the income structure transformation. Net fee and commission income surged by 235.3% year-on-year to 99 million yuan, wealth management scale reached 26.48B yuan, up 17.93%, and investment income increased by 8.95%. The rapid rise of light capital, high-value-added intermediary business has become a new engine to hedge against margin compression and drive growth, accelerating the formation of a diversified profit pattern.

Steady operations and high-quality assets provide a solid backing for shareholder returns. In 2025, Zhangjiagang Bank plans to pay a cash dividend of 0.22 yuan per 10 shares (tax included), with a total dividend of 538 million yuan and a payout ratio of 27.2%, up 1.2 percentage points year-on-year, maintaining stable dividends for many years, demonstrating confidence in long-term value.

In the short term, margin compression and pricing pressure in inclusive finance remain growth challenges. However, as liability costs continue to optimize, non-interest income contribution increases, and asset structure deepens, these pressures are gradually diminishing. In the long run, the “small and scattered” approach aligns with regulatory guidance and real economy needs. Coupled with Zhangjiagang’s active county economy, accelerated industrial upgrades, and deep local channels, risk control, and customer base, the bank is expected to solidify its “small but beautiful” benchmark during cycle adjustments and achieve high-quality sustainable development.

Personal opinion, for reference only.