On August 18, Bank Of Nanjing Co.,Ltd. (601009.SH) released its 2026 semi-annual report, posting operating revenue of RMB 31.596 billion and net profit attributable to shareholders of RMB 13.65 billion, up 10.94% and 8.17% year-on-year respectively. The growth was primarily driven by net interest income, which surged 40.19% during the reporting period, lifting its share of total operating revenue to 69.42%.
Beneath these seemingly robust figures, the bank's non-interest net income plunged 24.73% year-on-year in H1, while credit impairment losses soared 34.77%. The net interest margin narrowed further to 1.79%, and the provision coverage ratio has declined for several consecutive years. Adding to the pressure, multiple regional branches have received regulatory fines for credit-related violations, highlighting the structural imbalance in revenue composition and mounting asset quality pressures stemming from a growth model heavily reliant on credit expansion.
Structural Revenue Imbalance: Interest Income Up 40%, Non-Interest Income Shrinks Markedly
The bank's H1 revenue growth was driven almost entirely by net interest income. During the reporting period, net interest income reached RMB 21.935 billion, a sharp 40.19% increase year-on-year, pushing its share of operating revenue to 69.42%. In stark contrast, non-interest net income totaled just RMB 9.661 billion, down substantially by 24.73%, with its share plunging from 45.06% in the same period last year to 30.58%.
The decline in non-interest income was broad-based. Investment income fell 28.80% to RMB 5.757 billion, with gains from trading financial assets down 47.02% and returns on other debt investments dropping 72.92%. Net fee and commission income contracted 18.50% to RMB 2.283 billion, while fee and commission expenses climbed 44.29%, further squeezing the net contribution from intermediary businesses.
In response, management stated that for the next phase, the financial markets division will coordinate asset allocation arrangements, continue to flexibly optimize the three-category structure, and maintain a relatively balanced posture. The strategy aims to balance the stability of coupon income with the agility of trading operations, leveraging refined management and dynamic position adjustment mechanisms to steadily enhance overall returns and contribute positively to revenue growth.
Additionally, interest expenses in H1 fell 5.24% year-on-year to RMB 24.70 billion, including a 3.04% drop in deposit interest expenses and a 17.47% decline in bond payable interest. Meanwhile, the average yield on interest-earning assets stood at 3.34%, with the average loan rate at 4.27%, indicating no significant improvement in asset-side pricing.
Accompanying this revenue structural imbalance is a continued narrowing of the net interest margin. In H1 2026, Bank Of Nanjing Co.,Ltd.'s NIM stood at 1.79%, down from 1.82% at the end of 2025 and 1.94% at the end of 2024, accumulating a 15 basis point contraction over two years. With deposit rates already at historic lows and limited room for further liability cost reductions, the trajectory of the NIM warrants close attention.
Real Asset Quality Pressures Emerge, Provision Buffer Depleted Over Time
The bank's non-performing loan ratio was 0.82%, down a marginal 0.01 percentage point from the end of last year, with both special-mention loan and overdue loan ratios also declining. However, the substantial surge in credit impairment losses reveals genuine asset quality pressures. In H1, credit impairment losses reached RMB 7.441 billion, a sharp 34.77% increase year-on-year, adding RMB 1.92 billion. The financial report explicitly attributed this to "increased loan credit impairment provisions," implying that the bank is allocating more profits to cover potential risks despite the seemingly stable NPL ratio.
The stability of the NPL ratio is partly a result of balance sheet expansion combined with increased write-offs. During H1, total loans grew approximately 10%, while the combined balance of substandard, doubtful, and loss loans reached RMB 12.788 billion, up RMB 948 million from the end of last year. Overdue loans beyond 90 days totaled RMB 11.514 billion, an increase of RMB 449 million, and restructured loans rose to RMB 7.613 billion. The bank wrote off or transferred RMB 7.251 billion in loans during the reporting period.
By industry, certain sectors show elevated NPL ratios. Corporate real estate loans carried an NPL ratio of 2.37% with a balance of RMB 1.624 billion, significantly above the bank-wide average. The education sector had an NPL ratio as high as 12.51%, though the loan balance was just RMB 1.262 billion, limiting its overall impact. The report also disclosed that NPL ratios for personal business loans and credit card operations increased from the end of last year, indicating marginal pressure on retail asset quality.
Corresponding to these asset quality pressures, the provision coverage ratio has declined for years. As of June 2026, it stood at 306.11%, down 7.51 percentage points from the end of last year and significantly lower than the 335.27% recorded at the end of 2024. To be fair, the current ratio remains well above the 150% regulatory minimum, suggesting adequate risk absorption capacity. However, the sustained downward trend indicates the bank is consuming its accumulated risk buffer to address current asset quality challenges, warranting continued monitoring of future developments.
Capital Adequacy Under Pressure, Compliance Shortcomings Await Resolution
Capital replenishment remains a long-term challenge for the bank. As of June 30, 2026, the capital adequacy ratio was 13.02%, tier 1 capital adequacy stood at 10.59%, and core tier 1 capital adequacy was 9.37%. The capital adequacy ratio has declined 70 basis points from 13.72% at the end of 2024, while the tier 1 ratio has fallen 53 basis points from 11.12%. As a domestic systemically important bank, it faces higher additional capital requirements. During H1, risk-weighted assets grew 6.4% from the end of last year, with capital consumption outpacing internally generated capital through retained earnings. On a non-consolidated basis, the core tier 1 capital adequacy ratio was just 8.95%, leaving even thinner capital buffers.
On the compliance front, the bank has already received regulatory penalties this year. On March 19, 2026, the Zhejiang Regulatory Bureau of the National Financial Regulatory Administration fined the Hangzhou branch RMB 1.85 million, with relevant responsible person Cai Jun issued a warning for violations including imprudent working capital loan management and inadequate personal loan use monitoring. Earlier in January, the Lianyungang Lianyun branch was fined RMB 300,000 for inadequate loan investigation procedures.
Notably, the "inadequate personal loan use monitoring" issue cited in the Hangzhou branch penalty echoes the rising NPL ratios for personal business loans and credit card operations disclosed in the interim report. Public information shows that in 2025, Bank Of Nanjing Co.,Ltd. and its branches received approximately seven regulatory fines totaling around RMB 3.96 million, with violations concentrated in credit management, pre-loan investigation, and post-loan monitoring. The repeated penalties across multiple regional branches for similar issues suggest room for improvement in the transmission and execution of compliance policies at frontline business units.
Bank Of Nanjing Co.,Ltd. posted double-digit revenue and profit growth in H1 2026, maintained a stable NPL ratio, and met regulatory requirements for liquidity indicators, with no systemic risks to its fundamentals. Yet beneath the impressive numbers, the sharp contraction in non-interest income, surge in credit impairment charges, continued NIM compression, declining provision coverage, capital adequacy pressures, and compliance penalties collectively point to a core conclusion: current growth relies heavily on capital-intensive credit expansion and reduced liability costs, while light-capital intermediary businesses and financial market operations have weakened, with genuine asset quality pressures gradually surfacing. For the bank, restoring non-interest income momentum, stabilizing the NIM, reinforcing asset quality fundamentals, and strengthening branch-level compliance controls—while maintaining reasonable scale growth—will be critical to determining the quality of its future development.
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