HUISHANG BANK (03698.HK), the largest city commercial bank in Anhui Province, has seen its asset scale continue to rise in recent years, surpassing 2.3 trillion yuan by the end of 2025. However, behind this impressive growth lies multiple development concerns.

Since the beginning of 2025, the bank has received a series of regulatory penalties, with total fines exceeding 17 million yuan last year. In the first quarter of 2026, it received five additional penalties, accompanied by bans on employees, indicating widespread compliance risks.

In terms of performance, although the bank achieved net profit growth in 2025, its operating revenue increased by only 1.18%, indicating clearly insufficient growth momentum. The non-performing loan ratio for personal loans was significantly higher than the bank's average, highlighting structural pressure on asset quality. Additionally, since the resignation of former Chairman Yan Chen in July 2025, the position of chairman has remained vacant for over eight months. Coupled with issues such as management changes and weak internal control enforcement, the effectiveness of the bank's corporate governance mechanisms continues to be tested.

01. Frequent Penalties Over the Past Year Covering Multiple Violation Areas

In recent years, HUISHANG BANK has frequently faced compliance issues, with regulatory penalties becoming routine and密集. Violations have been widespread, from the head office to branches, and across traditional credit, retail, and intermediary businesses.

On April 9, the Bozhou Supervision Branch of the National Financial Regulatory Administration disclosed an administrative penalty notice, showing that HUISHANG BANK's Bozhou Branch was fined 300,000 yuan for issuing loans in violation of regulations. Simultaneously, regulators issued warnings to responsible individuals Liu Yan and Liu Yang, and banned Zhang Yongjie from the industry for five years.

Less than a month earlier, on March 13, the Jiangsu Supervision Bureau of the National Financial Regulatory Administration published penalty information indicating that four institutions under HUISHANG BANK—its Nanjing Branch, Nanjing Hexi Sub-branch, Nanjing Pukou Sub-branch, and Nanjing Changjiang Road Sub-branch—were collectively fined 2.6 million yuan. Seven individuals involved in violations were also penalized, with six receiving warnings and fines, and one being banned from the industry for eight years.

According to statistics from publicly available information from the National Financial Regulatory Administration, throughout 2025, HUISHANG BANK and its branches received a total of 22 institutional penalty notices, with cumulative fines exceeding 17 million yuan.

Notably, on December 5, 2025, the bank received three penalty notices in a single day, marking a peak in compliance risk incidents for the year.

On that day, the Anhui Supervision Bureau issued two major penalties to HUISHANG BANK's head office: one fined 1.5 million yuan for violations including irregular loan issuance, inadequate post-loan management, poor credit card business management, and imprudent wealth management practices; the other fined 6.65 million yuan for inadequate management of financial advisory services and non-compliant cross-regional business.

On the same day, the Chaohu Sub-branch was fined 300,000 yuan for inadequate post-loan management. The three penalties totaled over 8 million yuan, with responsible individuals concurrently receiving warnings and fines. Additionally, the Bengbu Wuhe Sub-branch was fined 350,000 yuan for non-compliant fee charges. Multiple penalties throughout the year covered nearly all core business areas, including credit, credit cards, wealth management, intermediary business, cross-regional operations, and fee management.

An analysis of the penalty reasons reveals that HUISHANG BANK's violations are notably repetitive and widespread. Common issues in credit business include insufficient pre-loan investigation, lax loan review, and ineffective post-loan management. Credit card operations suffer from problems such as excessive credit granting and lack of risk control. Intermediary and wealth management businesses show imprudent operations, while cross-regional business compliance management is lacking.

02. Rapid Scale Expansion Highlights Concerns Over Revenue Growth and Asset Quality

Public information shows that HUISHANG BANK is the first financial institution in China formed by the merger of city commercial banks and urban credit cooperatives, headquartered in Hefei, Anhui Province. It began operations on January 1, 2006, and was listed on the main board of the Hong Kong Stock Exchange in November 2013.

In its twelfth year as a listed company in Hong Kong, HUISHANG BANK delivered a performance report characterized by "impressive scale growth but weak profit quality." According to the bank's annual results announcement released on March 26, 2025, it achieved annual operating revenue of 37.67 billion yuan, a mere 1.18% year-on-year increase. Net profit was 16.926 billion yuan, up 6.34%, while net profit attributable to shareholders rose 7.21% to 16.525 billion yuan.

Meanwhile, the bank's asset scale expanded rapidly. By the end of 2025, total assets reached 2.326085 trillion yuan, an increase of 15.51% from the end of the previous year. Total customer loans and advances grew 12.80% to 1.130492 trillion yuan, and total customer deposits increased 11.17% to 1.26 trillion yuan.

The contrast between the rate of asset growth and revenue growth was the most striking feature of HUISHANG BANK's 2025 performance. The 15.51% asset growth rate, compared to the 1.18% revenue growth rate, indicates a typical scenario of "compensating for price with volume."

In terms of revenue structure, net interest income, the core revenue source for banks, has hit a bottleneck. Against the backdrop of continuously narrowing industry net interest margins, the yield from HUISHANG BANK's traditional credit business has declined. Meanwhile, growth in intermediary business income remains weak, and businesses like financial advisory have been penalized for compliance issues, further squeezing profit margins.

Regarding asset quality, the bank's overall non-performing loan ratio appeared stable, standing at 0.98% at the end of 2025, a slight decrease of 0.01 percentage points from the end of the previous year. However, structural issues are prominent, with significant pressure from the non-performing ratio in personal loans. Data shows that HUISHANG BANK's personal loan non-performing ratio reached 1.52% in 2025, higher than the 0.84% ratio for corporate loans and significantly above the bank's average.

Within this, risks in consumer credit, credit cards, and other unsecured loans are particularly acute, corroborating issues highlighted in the 2025 penalties regarding excessive credit card limits and lax risk control. Additionally, the proportion of special-mention loans increased from 1.13% in 2024 to 1.17% in 2025, indicating rising pressure from potential non-performing loan migration. If retail loan risks continue to emerge, they could further drag down the bank's overall asset quality.

Furthermore, concentrated risk release in the real estate sector poses another major concern for asset quality. In the first half of 2025, the bank's non-performing loans in the real estate sector surged from 398 million yuan at the beginning of the year to 1.156 billion yuan, with the non-performing ratio soaring to 3.12%—more than three times the bank's average. Although subsequent recovery and disposal measures provided some relief, risks accumulated from deep ties to the real estate industry will take considerable time to digest, exerting ongoing pressure on asset quality.

It is worth noting that the position of chairman at HUISHANG BANK remains vacant. Former Chairman Yan Chen resigned due to a work transfer on July 30, 2025, taking up a position as Director of the Henan Provincial Department of Industry and Information Technology. As of April 2026, the chairman's position has been vacant for over 250 days.

The prolonged absence of a chairman, who is central to bank governance and the primary person responsible for risk control, creates a vacuum in decision-making mechanisms and accountability systems. Currently, President Kong Qinglong is acting as the chair of the strategy committee, and non-executive director Lu Hao is acting as the chair of the risk committee. This "acting" model lacks statutory authority and decision-making effectiveness, leading to inefficiencies in key decisions related to capital replenishment, major strategic layouts, and risk disposal.

Beyond the vacant chairman position, Board Secretary Lian Baohua, who had served for many years, resigned in November 2025 upon reaching retirement age. As of April 2026, a successor for this role has not been appointed. Meanwhile, the chief compliance officer position remained vacant for a long time until it was assumed concurrently by President Kong Qinglong in February 2026.

The complexity of the shareholding structure also adds uncertainty to governance. In March 2026, the bank's second-largest shareholder, the "Zhongjing" group, announced plans to divest its entire stake of approximately 10.59%, involving a market value of about 6.53 billion Hong Kong dollars. The dispute over this stake with shareholder杉杉控股 has persisted for years. If the divestment occurs, it could alter the bank's ownership structure, potentially leading to adjustments in shareholder influence and further impacting board decisions and corporate governance stability.

Currently, as banking regulation tightens, industry competition intensifies, and net interest margins continue to narrow, city commercial banks face increasing operational and compliance pressures. For HUISHANG BANK, the urgent tasks are to fill key governance vacancies like the chairman position promptly, improve decision-making and accountability systems, comprehensively address internal control weaknesses, strengthen compliance enforcement and rectification accountability, and prevent the recurrence of violations.

Only by resolving the multiple challenges in governance, compliance, and performance can the bank truly transition from "scale expansion" to "high-quality development," safeguard regional financial stability, and regain the trust of the market and regulators.