Recently, Bank Of Guiyang Co.,Ltd., with total assets surpassing 770 billion yuan, released its 2026 semi-annual report, revealing a performance marked by rising revenue but falling profits. The financial data shows that in the first half of this year, the bank generated operating income of 7.207 billion yuan, a year-on-year increase of 10.87%, while its net interest margin also recovered by 0.14 percentage points year-on-year to 1.67%. However, despite this double-digit revenue growth, the bank's net profit attributable to shareholders declined by 4.61% year-on-year to 2.36 billion yuan, making it one of the few listed city commercial banks to see a profit decline.
Regarding asset quality, as of the end of June, the bank's non-performing loan (NPL) ratio had risen to 1.78%, up 0.19 percentage points from the beginning of the year, placing it among the highest NPL ratios among A-share listed banks. The NPL ratio for its personal loans climbed even more sharply, from 3.12% at the start of the year to 4.05%, an increase of 0.93 percentage points in just six months. The bank attributed this rise to a slower-than-expected pace of collection and disposal of existing non-performing loans during the period.
Where to begin your assessment
In the first half of the year, Bank Of Guiyang Co.,Ltd. achieved operating income of 7.207 billion yuan, an increase of 706 million yuan year-on-year, or 10.87%. Its net interest margin recovered by 0.14 percentage points year-on-year to 1.67%, placing it in the upper echelon of A-share listed banks, with one of the most notable recoveries. Looking at the revenue structure, net interest income remained the primary driver of the bank’s revenue growth. During the reporting period, the bank posted net interest income of 5.602 billion yuan, up 682 million yuan year-on-year, or 13.86%. This included a contribution of 6 million yuan from volume factors and 676 million yuan from interest rate factors. The bank believes this was largely due to intensified cost control on the liability side, combined with a concentration of existing high-cost liabilities entering their repricing cycle, which led to a significant year-on-year reduction in interest expenses.
In terms of non-interest income, the bank recorded 1.605 billion yuan in the first half, an increase of 24 million yuan year-on-year, or 1.55%. While net fee and commission income, gains from fair value changes, and other business income made positive contributions, a sharp drop in investment income dragged down the overall performance. Investment income for the first half stood at 869 million yuan, a decrease of 870 million yuan year-on-year, representing a decline of over 50%, primarily due to a reduction of 723 million yuan in gains from the disposal of other debt investments compared to the same period last year.
With the industry-wide narrowing of net interest margins, non-interest income has become a key growth area for small and medium-sized banks. Yu Fenghui, a special researcher at the China Financial Think Tank, noted that smaller banks should focus on diversifying revenue sources and building a stable, sustainable non-interest income structure, such as aggressively developing wealth management services to attract and retain customer funds with quality financial products and professional advice. However, in practice, non-interest income for these banks still faces considerable volatility and lacks stability.
Fu Yifu, a special researcher at Su Shang Bank, analyzed that the overall volatility of non-interest income for small and medium-sized banks has increased recently. On one hand, constrained by local credit demand, many of these banks rely heavily on bond investment as a key profit supplement, giving investment disposal gains significant weight in the non-interest segment. As bond market conditions fluctuate, gains from bond disposals and changes in fair value tend to swing with the market environment. On the other hand, traditional intermediary businesses like wealth management distribution are seeing sluggish growth due to market conditions, and the combination of these factors amplifies the volatility of non-interest income, weakening the stability of the profit structure.
Fu suggested that, at the industry level, small and medium-sized banks need to reduce their short-term reliance on investment gains from trading and disposal activities. This involves optimizing fixed-income asset allocation, compressing the scale of high-volatility trading books, and reducing the practice of using bond disposals to smooth profits during market cycles. They should also return to their core credit business, deepen their presence in local micro and small enterprises and local retail markets, and solidify the base of genuine intermediary business income such as settlement and distribution. Additionally, improving investment risk control and performance appraisal frameworks, while de-emphasizing short-term gains, can help smooth the impact of market cycles on performance and address the fragility of their profit structures.
Why the NPL ratio rose and provisions increased
Despite double-digit revenue growth in the first half, Bank Of Guiyang Co.,Ltd. saw its net profit attributable to shareholders fall by 4.61% year-on-year to 2.36 billion yuan. In its financial report, the bank explained that this was mainly due to increased provision for impairment on certain risk assets, aimed at continuously strengthening its ability to absorb risks. Data shows that during the reporting period, the bank recorded credit impairment losses of 2.583 billion yuan, an increase of 562 million yuan year-on-year. Behind this significant provisioning was a period of pressure on asset quality: as of the end of the reporting period, the NPL ratio had risen by 0.19 percentage points from the start of the year to 1.78%, while the provision coverage ratio fell to 229.57%.
Looking at historical data, from the end of 2023 to the end of 2025, the bank's NPL ratios were 1.59%, 1.58%, and 1.59%, respectively, with provision coverage ratios of 244.5%, 257.07%, and 235.62%, maintaining relative stability overall. Regarding the notable rise in the NPL ratio during the first half, the bank stated that this was due to prudential risk classification, where loans exhibiting changing risk characteristics were reclassified as non-performing. Additionally, a slower-than-expected collection and disposal pace for existing non-performing loans contributed to the higher ratio.
By business type, in the first half, corporate loans and personal loans accounted for 84.42% and 15.58% of total loans, respectively, and both saw their NPL ratios increase. The personal loan NPL ratio surged by 93 basis points from the start of the year to 4.05%. By industry, real estate, wholesale and retail, and construction were the top three sectors for loan allocation, accounting for 16.99%, 13.93%, and 10.93% of total loans, respectively. As of the end of the reporting period, the bank's real estate loan balance had increased by another 3.053 billion yuan from the beginning of the year.
It has been observed that in recent years, impairment provisions have become a key variable affecting the bank's performance. In 2025, the bank's operating income fell by 12.94% year-on-year to 12.999 billion yuan, but its credit and other asset impairment losses were reduced by 2.231 billion yuan to 3.052 billion yuan, effectively offsetting the pressure from lower revenue and ultimately resulting in a 1.66% year-on-year increase in net profit attributable to shareholders. However, in its tracking rating report, Lianhe Ratings warned that while the bank's credit asset quality indicators remain generally stable, the rising proportion of real estate loans and the large scale of extended loans warrant attention to potential changes in asset quality and the associated pressure for provisioning.
Fu Yifu further analyzed that, from an industry perspective, provisions have a dual effect on profits: during periods of asset quality pressure, even if operating income grows, increased provisioning dampens book profits but simultaneously strengthens the risk buffer. Conversely, releasing existing provisions can boost current profits but consumes previously accumulated risk reserves. He noted that with asset quality pressure emerging in some regional banks' retail and corporate portfolios, many institutions are choosing to proactively increase provisions ahead of time to digest potential risks, even as revenue improves marginally, leading to a divergence between income and profit trends. When evaluating provisioning behavior, it is important not to simply focus on the decline in net profit, but to distinguish between passive exposure to asset risk and proactive front-loading of risk disposal. Moderate forward-looking provisioning helps mitigate future asset quality shocks, but two extremes should be guarded against: one is excessive provisioning that distorts true operational performance, and the other is relying on the release of provisions to beautify financial statements. To assess a bank's operational quality, greater attention should be paid to pre-provision operating profit, restoring the true operational fundamentals of the bank and balancing risk prudence with the authenticity of performance.
Additionally, in terms of capital adequacy, as of the end of June this year, Bank Of Guiyang Co.,Ltd. reported a capital adequacy ratio of 15.07%, a tier 1 capital adequacy ratio of 13.86%, and a core tier 1 capital adequacy ratio of 12.87%. Although all three indicators declined by more than 20 basis points from the start of the year, they remain generally stable.
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