Hunan Bank Co., Ltd., a provincial city commercial bank, has seen its profit growth grind to a halt. The bank recently released its performance figures for the first half of 2026, reporting operating revenue of 5.901 billion yuan, a 5.33% year-on-year increase, while net profit reached 1.953 billion yuan, a marginal growth of just 0.56%. This follows a trend from 2025, when the bank's operating revenue and net profit declined by 4.68% and 1% respectively.
As of the end of June 2026, the bank's total assets stood at 652.521 billion yuan, up 4.96% from the start of the year. Loans and advances extended reached 350.228 billion yuan, a 6.72% increase, while customer deposits grew by 8.62% to 401.309 billion yuan. Driven by this asset expansion, the bank recorded net interest income of 4.506 billion yuan in the first half, up 6.15% year-on-year.
However, the bank's fee and commission income painted a different picture. During the same period, net fee and commission income fell to 199 million yuan, a sharp 27% decline year-on-year, accounting for only 3.37% of total operating revenue. This weakness followed a 41.01% drop in fee and commission income in 2025, highlighting it as a persistent underperformer.
Adding to the challenges, the bank faces considerable pressure on credit asset quality. By the end of June 2026, the non-performing loan ratio had risen to 1.72%, up 0.03 percentage points from the end of 2025. Total overdue loans reached 7.156 billion yuan, a 6.3% increase from the beginning of the year. To bolster its defenses, the bank increased its credit impairment loss provisions to 1.55 billion yuan in the first half of 2026, a 14.55% year-on-year rise, further squeezing its profit margins.
Where the Growth Stalled: Net Profit Rises a Mere 0.56%
Formerly known as Huarong Xiangjiang Bank, Hunan Bank underwent a significant transformation in 2022 when Hunan Chixin Financial Holding Group, the province's sole provincial-level financial holding firm, joined forces with Central Huijin to acquire the stake held by China Huarong, becoming the bank's largest shareholder. This led to the bank's rebranding to its current name.
Following the rebranding, from 2022 to 2025, Hunan Bank recorded operating revenues of 10.929 billion yuan, 11.4 billion yuan, 11.402 billion yuan, and 10.868 billion yuan, with net profits of 3.086 billion yuan, 3.303 billion yuan, 3.352 billion yuan, and 3.318 billion yuan respectively. However, starting in 2024, the bank's performance growth noticeably decelerated, culminating in the 2025 declines in both revenue and profit.
A recent rating report from China Chengxin International noted that while the bank's interest-earning asset base continues to grow and cost controls remain stringent, the narrowing net interest margin and falling non-interest income have impacted profitability, leading to a decrease in net profit and suggesting room for improvement in overall earning power.
In the first half of 2026, Hunan Bank's net profit growth of 0.56% (an increase of just 10.81 million yuan) lagged far behind its revenue growth of 5.33% (an increase of 299 million yuan). The bank's interest income in the period was 9.107 billion yuan, down about 1% year-on-year, while interest expenses fell by 7.2% to 4.601 billion yuan. This indicates that the bank managed to offset the impact of declining asset yields by reducing interest expenses, aided by faster deposit growth, thereby achieving net interest income growth.
Despite this, the bank's intermediary business has been weak over the past two years. In the first half of 2026, net fee and commission income plummeted by roughly 27% year-on-year to just 199 million yuan. In other non-interest income, investment gains rose 16.38% to 1.334 billion yuan, but fair value change losses widened significantly to -159 million yuan, compared to a loss of 68.12 million yuan in the same period last year. Furthermore, the 14.55% increase in credit impairment provisions, which accounted for 58.7% of total pre-tax profit, further eroded profitability.
Rising Bad Debt and Cooling Capital Ratios
In addition to stagnant profit growth, Hunan Bank is confronting deteriorating asset quality. From the end of 2023 to the end of 2025, the bank's consolidated non-performing loan balances were 4.988 billion yuan, 5.178 billion yuan, and 5.726 billion yuan, with corresponding NPL ratios of 1.75%, 1.65%, and 1.69%, showing an upward tick again at the end of 2025.
According to the rating report, the bank's existing non-performing loans are concentrated in the real estate-related, wholesale and retail, and manufacturing sectors. Since 2025, due to macroeconomic fluctuations and the ongoing adjustment phase of the real estate market, clients in the local real estate, construction, and manufacturing industries have faced increased operational difficulties. Additionally, with residents' income under pressure, some personal loan risks have emerged, leading to 4.03 billion yuan in new non-performing loans during 2025. China Chengxin International cautioned that loans subject to extensions, refinancing, or deferred principal and interest payments are prone to becoming non-performing in a volatile macroeconomic environment, indicating further downward pressure on asset quality ahead.
By the end of June 2026, Hunan Bank's non-performing loan balance had grown to 6.198 billion yuan, with the NPL ratio at 1.72%, up 0.03 percentage points from the end of 2025. Overdue loans totaled 7.156 billion yuan, a 6.3% increase. The rise in bad loans also impacted its provision coverage ratio, which fell by 7.16 percentage points to 168.18% as of the end of June 2026.
It is noteworthy that as a key provincial city commercial bank, Hunan Bank enjoys strong support from local state-owned capital. In October 2025, the bank completed a capital increase of 4.01 billion yuan, with the Hunan Provincial Department of Finance and eight provincial or municipal state-owned enterprises participating. Additionally, in April 2025, the bank publicly issued 5.3 billion yuan in perpetual bonds, followed by a 3 billion yuan subordinated bond issuance in October. These measures significantly boosted its capital strength, with capital adequacy, Tier 1 capital adequacy, and core Tier 1 capital adequacy ratios reaching 12.82%, 10.61%, and 9.38% respectively at the end of 2025.
However, by the end of June 2026, these three indicators had slipped again to 12.47%, 10.41%, and 9.24%. As of the end of 2025, Hunan state-owned capital directly or indirectly held 65.88% of Hunan Bank's shares, with Hunan Chixin Financial Holding Group and its affiliates holding a combined 35.85%, making the Hunan Provincial Government the actual controller. At the end of June 2026, the top five shareholders were Hunan Chixin Financial Holding Group (18.18%), Central Huijin (17.71%), Hunan Chixin Investment Holding Co., Ltd. (13.25%), the Hunan Provincial Department of Finance (5.55%), and Hunan Publishing Investment Holding Group (5.03%).