Ping An Bank Co., Ltd. has finally reported a simultaneous increase in both revenue and profit, marking a potential turning point after a prolonged downturn. However, the bank has already accumulated fines exceeding twenty million yuan this year, raising the critical question of whether this performance growth is sustainable.
The bank's financial results are showing signs of improvement. In the first half of this year, revenue reached 70.617 billion yuan, a year-on-year increase of 1.8%, while net profit climbed 3.3% to 25.696 billion yuan. This dual growth has put an end to the three consecutive years of revenue decline that began in the first half of 2023.
Furthermore, the net interest margin, which remained flat at 1.8% compared to the same period last year, is being viewed by external observers as key evidence that the bank's performance is stabilizing. However, during the interim results conference, the bank's President, Ji Guangheng, emphasized that "there remains a certain gap between current operating results and the goals of high-quality development and sustainable profitability."
This is not merely a display of modesty. Three years into its strategic transformation, the bank, once hailed as the "new king of retail banking," now sees its retail business contributing less to revenue than its corporate banking arm. While wealth management has emerged as a growth highlight, it is still not substantial enough to carry the overall business.
More concerning is the string of internal control issues the bank has faced this year, including two fines related to its auto loan business within a single month. Despite the recent recovery in performance, underlying risk control vulnerabilities persist, indicating that the bank's period of adjustment is far from over.
Evaluating the Quality of the Performance Rebound
The recovery in the net interest margin, a key determinant of a bank's profitability, has allowed Ping An Bank Co., Ltd. to return to revenue growth. In the first quarter of this year, the net interest margin was 1.79%, which improved to 1.81% in the second quarter. This uptick mirrors a broader industry trend of stabilization.
Previously, the industry's net interest margin had been on a downward trajectory, falling from 1.97% in the first quarter of 2022 to 1.4% in the first quarter of this year before a slight recovery to 1.41% in the second quarter. Analysts attribute this recovery primarily to ongoing improvements in liability costs, as high-interest time deposits mature and are repriced at lower rates, effectively reducing funding costs. This positive effect is expected to continue releasing over the coming quarters.
The bank's own data supports this assessment. In the first half of the year, the cost of interest-bearing liabilities was 1.42%, down 37 basis points year-on-year, and the deposit cost was 1.38%, down 38 basis points. On the asset side, however, the yield on loans and advances was 3.64%, a decrease of 39 basis points year-on-year. This shows that the reduction in liability costs has almost entirely offset the decline in asset yields.
While the bank is saving on the liability side, it is earning less on the asset side. In the first half, loan balances grew 1.8% to 3.45 trillion yuan, whereas deposits increased 2.2% to 3.66 trillion yuan. Deposits are coming in, but loan growth is lagging behind. Relying solely on cost savings makes the growth appear fragile.
In the first quarter, revenue grew 4.65% year-on-year, ending eight consecutive quarters of declining growth, and the stock price rallied on the news. However, in the second quarter, revenue was 35.34 billion yuan, a year-on-year decrease of 0.94%, a significant slowdown from the first quarter. This suggests the turning point is not yet confirmed, and a genuine recovery requires further validation. The stock price has remained subdued following the results announcement.
The quarterly slowdown is largely attributed to a weakening contribution from non-interest income. While net fee and commission income rose 3.7% to 13.214 billion yuan in the first half, bank card fee income within that category declined. Other non-interest net income increased 8% to 13.115 billion yuan, driven by gains in bond investment fair value, but this is tied to market conditions and is inherently unstable.
It is unrealistic to expect a significant rebound in net interest income for the entire banking industry right now. The downward pressure on asset yields is unlikely to be fundamentally reversed in the short term, and the recovery in credit demand will take time. Conditions for a substantial margin rebound are absent, and the industry's long-term transformation of profit models will be a challenging journey, with low net interest margins likely becoming the new normal.
The president also conceded that the era of high-leverage growth and rapidly increasing profitability is unlikely to return anytime soon. Given the underwhelming quality of the dual growth in revenue and profit, and the unconfirmed turning point, the market's cautious stance on the bank's stock is understandable.
Retail Business Still in the Recovery Phase
The improvement in performance suggests the three-year transformation is yielding initial results. However, the retail business, which is at the center of this change, is still working to stabilize. The bank's latest report reiterates its commitment to "strengthening retail" and maintaining its strategic positioning, but the luster of its "retail king" title continues to fade.
In 2016, the bank pivoted fully towards retail banking, and by 2021, retail revenue accounted for as much as 58% of its total income. However, since the reform began in the second half of 2023, which involved reducing high-risk assets, the retail segment's prominence has been steadily diminishing.
In the first half of this year, retail financial business revenue was 31.571 billion yuan, up 1.6% year-on-year, representing 44.7% of total revenue. In contrast, corporate banking revenue was 32.559 billion yuan, accounting for 46.1% of the total and surpassing retail for the first time. In terms of net profit contribution, corporate banking accounted for 72.9%, while retail contributed 8.4%, up from just 4% in the same period last year. This increase in retail profit contribution was mainly due to a year-on-year decline in impairment losses for retail assets, indicating that profit growth was driven more by reduced provisioning than by fundamental business strength.
Moreover, the retail business remains under pressure. As of the end of the second quarter, retail loan balances were 1.727 trillion yuan, nearly flat compared to the end of last year. Credit card receivables decreased by 0.7%, and consumer and operating loans fell by 0.5% and 0.8%, respectively. In an effort to reduce high-risk assets, the bank is actively shifting towards higher-quality customers. Collateralized loans now account for 62.2% of personal loans, and housing mortgage loans grew 2.4%. New products targeting quality clients, "Chengye Dai" and "Chengye Dai", saw their balances surge by 69.5% in just six months.
Despite halting overall expansion, asset quality continues to face challenges. The number of active credit card users fell 1.9% year-on-year to 42.85 million. The non-performing loan ratio for consumer loans rose to 1.24%, up 0.12 percentage points from the end of last year. While the credit card NPL ratio has improved, it remains at a relatively high 2.23%.
It is worth noting that wealth management is becoming a new growth area. Wealth management fee income rose 35.6% year-on-year to 3.343 billion yuan in the first half, with personal insurance agency fees up 51.2% and personal fund agency fees up 45.1%. Meanwhile, the bank's retail AUM has reached 4.4 trillion yuan, with private banking AUM hitting 2.11 trillion yuan, a 6% increase from the end of last year and the first time it has surpassed the 2 trillion yuan mark after hovering above 1.9 trillion for two years. Over 70% of the retail AUM growth came from private banking, making it a new engine for the retail business. The synergies with the broader group's insurance, fund, and private banking operations are becoming evident.
However, wealth management still has a long way to go before it becomes a mainstay and can significantly boost the retail segment's contribution in the short term. With corporate banking currently propping up the overall performance, the goal of "strengthening retail" will require more time.
Ongoing Compliance Challenges
At the semi-annual work conference, the president stated that the bank's pursuit of growth is not about simple scale expansion or risky asset expansion, but about quality, sustainable, and cycle-tested profit growth. In reality, while performance is still being repaired, old risk control vulnerabilities remain unaddressed.
In 2024, the bank received 73 regulatory fines totaling 83.0958 million yuan, the highest among the 12 joint-stock banks. In 2025, the number of fines dropped to 64, with total penalties exceeding 40 million yuan. While this appeared to be an improvement, compliance issues have continued to surface in 2026.
This year, the bank and its branches have received at least 26 institutional regulatory fines, totaling over 23 million yuan. There has been a noticeable increase in fines related to its auto loan business. In April, a branch was fined 400,000 yuan for inadequate due diligence in vehicle mortgage loan pre-lending checks, followed by a 1.4 million yuan fine on the auto finance center headquarters for violations in commercial vehicle loans, auto-secured loans, and additional fee loan businesses, as well as imprudent customer income assessment. In June, two more branches were fined for inadequate loan checks, totaling 750,000 yuan.
The frequent breaches in auto loan internal controls partly reflect the transformation pains of the retail business. Auto loans are a significant part of the bank's retail portfolio, accounting for approximately 17.6% of personal loan balances at the end of 2025. Despite the overall decline in personal loans, auto finance continued to grow, with balances reaching 306.457 billion yuan by the end of the second quarter, a 0.5% increase from the end of last year.
This raises questions about whether the expansion in retail sub-prime businesses like auto finance is placing performance pressures on branches, potentially diluting the head office's risk controls at the grassroots level. Or, despite years of retail transformation, whether the bank's compliance and risk control frameworks are still stuck in the era of rapid retail expansion and have failed to keep pace with the transformation.
Regulatory penalties this year have spanned core areas such as credit management, anti-money laundering, financial statistics, and employee conduct, showing a pattern of wide geographical distribution, scattered violation types, and a concentration of credit issues. These failures on the risk control chain point to blockages in the transmission mechanism from the head office to its branches. Until these blockages are cleared and risk control gaps are filled, the bank will struggle to achieve its goal of quality and sustainable profit growth, and its period of transformation-related pain is likely to continue.
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