Under significant asset quality pressure, Guangzhou Rural Commercial Bank (GRCB, 01551.HK) has once again offloaded a multi-billion-yuan asset package to swiftly reduce its burden.
Recently, GRCB disclosed an asset sale transaction, transferring assets with a total consideration of 12.25 billion yuan to Guangzhou Asset Management Co., Ltd. (Guangzhou Asset). The involved debt amount totals approximately 18.928 billion yuan.
This marks the third consecutive year that GRCB has divested over 10 billion yuan in non-performing assets. Behind this move lies the bank's substantial credit asset quality challenges.
As of June 2025, GRCB's non-performing loan (NPL) ratio rebounded to 1.98%, up from 1.66% at the end of the previous year. Due to deteriorating asset quality and increased provisioning, the bank reported H1 2025 operating income of 8.037 billion yuan, a 9.41% year-on-year increase, but net profit attributable to shareholders fell 6.83% to 1.374 billion yuan. Notably, the bank recorded 3.133 billion yuan in loan impairment losses, up 23.87% year-on-year.
By selling another asset package to a local asset management company (AMC), GRCB aims to quickly lower its NPL ratio and provisioning requirements while enhancing asset liquidity and risk resilience.
Including this transaction, GRCB has divested a total of 48.1 billion yuan in debt over three years, with a combined transaction value of 31.71 billion yuan.
**Three Years of Billion-Yuan Asset Sales** GRCB announced the completion of its latest asset sale on November 29, 2025. The bank sold the assets to Guangzhou Asset for 12.25 billion yuan, with the final price not lower than the preliminary minimum disclosed earlier.
The payment will be made in installments: 30% (3.675 billion yuan) has been paid upfront, while the remaining 70% (8.575 billion yuan) will be settled in nine equal annual installments from 2026 to 2034.
Guangzhou Asset, a local AMC, specializes in bulk transfers of non-performing assets from financial institutions. Its major shareholders include Guangzhou Yuexiu Capital Holdings Group Co., Ltd. (000987.SZ), Guangzhou Hengyun Enterprises Holding Ltd (000531.SZ), and two other Guangdong state-owned enterprises.
The sold assets consist of GRCB's credit assets (loans), with a principal amount of approximately 14.978 billion yuan and accrued interest of 3.897 billion yuan as of June 2025. After accounting for impairments, the unaudited book value stood at 12.132 billion yuan.
These assets have been loss-making, with post-tax net losses of 381 million yuan and 795 million yuan in 2023 and 2024, respectively.
This is GRCB's third major asset divestment in as many years. In 2023, it sold 9.467 billion yuan in assets (including loans and investments), followed by a 9.993 billion yuan credit asset sale to Guangzhou Asset in 2024. Including the latest deal, GRCB has offloaded 48.1 billion yuan in debt for 31.71 billion yuan, reflecting varying degrees of discount.
**Rising NPLs and Declining Profitability** The primary motivation for GRCB's asset sales is to strengthen risk resilience and optimize asset quality. From 2020 to 2024, its NPL ratio fluctuated between 1.66% and 2.11%, peaking in 2022 before declining. However, by mid-2025, the ratio rebounded to 1.98%, with corporate and personal loan NPLs rising to 1.69% and 3.55%, respectively.
By sector, wholesale/retail (34.69% of corporate NPLs), leasing/business services (14.49%), and agriculture (11.39%) were the main contributors, with NPL ratios of 4.48%, 0.87%, and 9.56%, respectively.
Notably, GRCB's 2024 asset sale primarily involved real estate loans, which reduced its real estate NPL ratio from 5.94% in 2023 to 1.5% by mid-2025. The latest sale package included 38.78% leasing/business services loans, 20.46% real estate loans, and 16.27% wholesale/retail loans.
GRCB's financial performance has also been under pressure. From 2020 to 2024, operating income declined for three consecutive years, while net profit dropped for two straight years. Although H1 2025 revenue grew 9.41%, net profit fell 6.83% due to a 30.6% surge in credit impairment losses (3.133 billion yuan in loan impairments alone).
The bank stated that the asset sales will improve liquidity, mitigate losses, and enhance risk resilience. Proceeds will be used for general operations, with the transaction expected to lower the NPL ratio and provisioning burden while boosting efficiency.
As of June 2025, GRCB's capital adequacy ratios declined across all tiers: total capital adequacy (13.62% vs. 14.52% at end-2024), Tier 1 (10.88% vs. 11.42%), and core Tier 1 (9.41% vs. 9.9%).
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