Although JINSHANG BANK (02558.HK) recently completed the disposal of a non-performing asset portfolio valued at 1.421 billion yuan, pressure on its asset quality remained unabated in its 2025 financial report.

The 2025 report revealed that while JINSHANG BANK's total assets exceeded 393 billion yuan and the decline in net profit narrowed, the bank's total non-performing loans (NPLs) reached 4.249 billion yuan. This represents an increase of 683 million yuan compared to 2024. The non-performing loan ratio rose by 0.18 percentage points from 1.77% to 1.95%, marking the highest level in recent years.

Concurrently, a significant divergence emerged in the bank's overdue loan structure: short- and medium-term overdue loans increased sharply, while long-term overdue loans dropped by more than half. This contradiction may be linked to the transfer of non-performing assets, which was only finalized in 2026.

JINSHANG BANK did not respond to inquiries regarding the changes in its overdue loan structure and its non-performing asset disposal measures by the time of publication.

The bank experienced a "dual increase" in its NPL metrics. As the largest city commercial bank in Shanxi Province, JINSHANG BANK saw its asset scale grow steadily in 2025, with total assets increasing by 4.4% year-on-year to surpass 393 billion yuan. However, the downward trend in performance persisted: annual operating income was 5.445 billion yuan, down 6.0% year-on-year, and net profit attributable to the parent company was 1.665 billion yuan, a decrease of 5.1%.

Regarding asset quality, JINSHANG BANK's NPL ratio reached 1.95% in 2025, up 0.18 percentage points from 1.77% in 2024, hitting a multi-year high. The total amount of NPLs reached 4.249 billion yuan, an increase of 683 million yuan from 2024.

"The primary reason for the increase in total NPLs is the ongoing adjustment in the overall real estate market, which has weakened the debt repayment capacity of some real estate enterprises, leading to operational difficulties and subsequent loan defaults," JINSHANG BANK stated in its financial report.

In terms of loan distribution by industry, the bank's corporate loans are primarily concentrated in manufacturing, mining, wholesale and retail, leasing and business services, and the real estate sector. The total value of corporate loans to the real estate sector reached 10.26 billion yuan by the end of 2025, accounting for 7.1% of its corporate loan portfolio.

Regarding the industry distribution of NPLs, the bank saw improvements in the NPL ratios for manufacturing, mining, and construction. Notably, due to recovery and disposal efforts, the outstanding NPL balance for the leasing and business services sector plummeted from 577 million yuan to 1.5 million yuan, with the NPL ratio dropping from 5.35% to 0.01%.

However, risks associated with real estate loans accelerated significantly. By year-end, the bank's NPL ratio for the real estate sector surged to 12.24% from 0.36% in 2024, an increase of 11.88 percentage points. The outstanding NPL balance for this sector skyrocketed from approximately 32 million yuan to 1.255 billion yuan, an increase of over 38 times.

In recent years, influenced by industry cycles and the economic environment, the real estate sector has undergone profound adjustments, leading to increased exposure of non-performing real estate loans across the banking industry. Although overall risk was being cleared in 2025, the NPL ratio for corporate real estate loans at commercial banks remained high, with several banks, including JINSHANG BANK, facing mounting pressure from rising real estate NPLs.

Simultaneously, risks in the retail credit market entered a rising phase. According to securities firm estimates, by the end of 2025, the average NPL ratio for retail credit at 22 A-share listed banks that had disclosed their results had increased by 0.24 percentage points from the beginning of the year to 1.71%. Specifically, NPL ratios for credit cards, consumer loans, and mortgages rose by 0.12, 0.10, and 0.07 percentage points, respectively.

JINSHANG BANK reflected this trend. By the end of 2025, its corporate loan NPL ratio increased from 2.19% to 2.39%, while its personal loan NPL ratio rose from 2.28% to 2.52%, with corresponding increases in the total NPL amounts for both categories.

Prior to 2025, JINSHANG BANK's asset quality had remained stable for an extended period. From the end of 2020 to 2024, the bank's NPL ratios were 1.84%, 1.84%, 1.80%, 1.78%, and 1.77% respectively, showing a year-on-year declining trend. As of the end of June 2025, the NPL ratio was still maintained at 1.77%, indicating overall stability.

However, the maturity structure of overdue loans disclosed in the 2025 financial report revealed new structural pressures on the bank's asset quality.

According to regulatory requirements, loans overdue (including those overdue after extension) for more than 90 days must be classified as non-performing. Analysis of the overdue loan maturity structure at JINSHANG BANK shows a clear divergence: loans overdue for up to 3 months decreased from 1.472 billion yuan in 2024 to 571 million yuan, with their share of total loans dropping from 0.7% to 0.3%. Loans overdue for more than 3 years decreased from 767 million yuan to 375 million yuan, with their share falling from 0.4% to 0.2%, a reduction of over 50%.

In contrast, the amounts for loans overdue for 3 to 6 months, 6 months to 1 year, and 1 to 3 years all increased significantly. Combined, these mid-term overdue categories increased by 1.713 billion yuan compared to 2024, and their collective share of total loans rose from 0.6% to 1.3%. This suggests that while some borrowers are experiencing medium-term repayment pressure and have not yet defaulted long-term, risks are accumulating.

"The substantial reduction in loans overdue for more than three years is unlikely to be achieved through natural recovery alone. It is more probable that the bank proactively implemented strong disposal measures, such as the bulk transfer of non-performing asset portfolios to asset management companies," commented Yuan Shuai, co-initiator of the New Intelligence Faction New Quality Productivity Salon. He noted that this structural divergence—a surge in short- and medium-term overdue loans coupled with a sharp drop in long-term overdue loans—typically indicates that a bank is accelerating the cleanup of long-standing non-performing assets. He also cautioned that the surge in short- and medium-term overdue loans requires vigilance, as failure to resolve these effectively could lead to their conversion into long-term defaults, forming a new burden of non-performing assets.

A series of non-performing asset disposal actions taken by JINSHANG BANK in 2025 may provide an explanation for this situation.

It was noted that JINSHANG BANK disclosed in 2025 a plan to transfer a portfolio of non-performing assets to Shanxi local asset management company Jinyang Asset Management. The portfolio involved a single fund trust business and loans to seven enterprises, with a book value of approximately 1.421 billion yuan, transferred for a price of 310 million yuan. This asset transfer was subsequently completed on February 11, 2026.

JINSHANG BANK stated in an announcement that selling these non-performing assets would reduce the amount of its non-performing loans. "The proceeds from the transfer of the relevant assets will be used to cover the losses incurred by JINSHANG BANK on these non-performing assets, thereby reducing the bank's NPL amount and promoting high-quality and sustainable development."

Simultaneously, the financial report indicated that JINSHANG BANK is intensifying its efforts to recover non-performing assets. By the end of the reporting period, the bank had transferred loans and advances totaling 1.055 billion yuan to independent third-party institutions for a consideration of 329 million yuan. The bank also implemented multiple risk disposal plans, leading to the recovery and disposal of 2.15 billion yuan in non-performing assets throughout the year.

An inquiry was sent to JINSHANG BANK on April 8 regarding whether the aforementioned 1.421 billion yuan asset transfer was reflected in the 2025 financial report and whether the reduction in loans overdue for more than three years was a result of this transfer. No response had been received by the time of publication.

If this transfer was already accounted for in the 2025 financial statements, it would imply that even after a significant disposal, the bank's NPL ratio still climbed to 1.95%, suggesting that the actual pressure on asset quality might be greater than the book data indicates. If it was not included, then following the completion of this asset transfer in 2026, JINSHANG BANK's non-performing loan scale is expected to see significant improvement.