Commercial bank financial reports often serve as a sensitive indicator of macroeconomic cycles. During the 2025-2026 period, characterized by consecutive reductions in the loan prime rate and widespread pressure on net interest margins across the banking sector, Minsheng Bank's financial data exhibited a trajectory that defied industry intuition. In the first quarter, the bank's net interest margin, which had been declining for years, finally showed signs of stabilization, rising against the trend by 2 basis points from the beginning of the year to 1.43%. During the same period, its operating revenue reached 37.822 billion yuan, maintaining a year-on-year growth of 2.74%. However, this apparent stabilization and improvement in revenue seem unable to mask the stark reality on the profit front. In the first quarter, Minsheng Bank's net profit attributable to shareholders fell by 9.64% year-on-year, placing it at the bottom among 42 A-share listed banks.
If operating revenue is stabilizing and growing, why has the net profit actually landing in its pocket shrunk significantly? The answer is that the money earned has been used by management to fill holes left by past asset quality issues. This contrast reflects Minsheng Bank's current true situation: the seemingly offensive performance is, in fact, a "tightening its belt" defensive maneuver. This joint-stock bank is still undergoing a balance sheet cleansing, trading time for space.
The market was not unprepared for Minsheng Bank's profit contraction. Since 2022, the bank's profit growth had shown signs of fatigue, and from 2024 onwards, it entered a prolonged period of negative growth. The core reason is that most of the marginal income generated by front-end departments has been used to fill the gap of non-performing assets. When a bank writes off bad loans, it does not primarily consume current profits but rather draws from the "reserve pool" (provisions) accumulated in the past. However, regulatory rules stipulate that a bank's provision coverage ratio cannot fall below 130%. Therefore, if bad loan write-offs are too aggressive and deplete the pool, the bank has no choice but to use its newly earned revenue to "replenish the water" (increase provision accruals). What is eating into Minsheng Bank's profits is precisely this massive "replenishment fee."
From 2024 to 2025, Minsheng Bank's cumulative "write-offs and transfers for the year" for loans and advances reached the hundred-billion-yuan level. To maintain the provision coverage ratio, it had to accrue 53.95 billion yuan in credit impairment losses in 2025. The script for 2026 was the same. In the first quarter, the bank accrued 13.892 billion yuan in credit impairment losses, far exceeding last year's 10.858 billion yuan. The additional 3 billion yuan in impairment accruals directly turned the 2.74% revenue growth in the first quarter into a -9.64% negative profit growth.
Trading profits for asset quality is paying a belated bill for past aggressive expansion. Around 2020, Minsheng Bank's non-performing risks erupted, with incidents involving companies like Kangdexin and Huishan Dairy surfacing, and its credit card non-performing loan ratio climbing, pushing the bank's overall NPL ratio to 1.82%, the worst among joint-stock banks. For the following five years, Minsheng Bank was mired in a prolonged asset quality repair process. By 2025, although its NPL ratio had improved to 1.46%, the repair process was far from over. At the end of the first quarter, its provision coverage ratio dropped to 141.94%, operating close to the regulatory red line. Faced with still-emerging existing bad loans and a provision pool with no buffer left, management abandoned the traditional method of using provisions to smooth profits, opting instead for a hard clearance strategy where current profits fully absorb risks.
The reduction in corporate real estate loans is the core battleground of this clearance. In 2025, Minsheng Bank's NPL ratio for corporate real estate loans plummeted from 5.01% the previous year to 3.61%. This sharp drop was not due to a natural recovery in the industry's fundamentals but was the result of forceful reductions through resolute legal action and asset liquidation. In earlier years, Minsheng Bank's equity was long dispersed, and it was once caught in a vortex due to the involvement of capital groups like the "Fanhai Group" and "Anbang Group." Even as late as 2024, the "Fanhai Group," "Dongfang Group," and Evergrande still had hundreds of billions in loan exposures with Minsheng Bank. With the successive appointments of senior management with risk control backgrounds from large state-owned banks, such as Gao Yingxin from Bank of China in 2020 and Wang Xiaoyong from China Construction Bank in 2024, Minsheng Bank's past compromises on related-party lending to major shareholders and its aggressive "growth-over-risk-control" approach were completely terminated.
Taking its Beijing branch as an example, since 2023, the bank has successively filed lawsuits against previously deeply intertwined related entities like Fanhai Holdings and China Fanhai. As of March 2026, in cases demanding repayment of 2.4 billion yuan in principal and interest from Fanhai Holdings, seven lawsuits have already obtained effective judgments and entered the enforcement stage.
Regarding the trade-off between profits and asset quality, President Wang Xiaoyong did not shy away, stating that "the decline in profits is mainly due to increased non-performing disposal and higher provision accruals." Chairman Gao Yingxin further stated that the company would now rather forgo business opportunities if there were doubts. The attitude of management is corroborated by court-enforced executions and massive financial write-offs. Through this "cutting off the arm to save the body" approach, Minsheng Bank is severing its historical burdens. The price of deep profit contraction is also the necessary path for its return to a normal state of compliance and risk control.
Under asset pressure, Minsheng Bank's strategy in recent years has shifted from offense to comprehensive defense. On one hand, it is because the real money earned currently has been entirely used to fill bad loan holes. On the other hand, it is also because management remains cautious about the safety of new assets, unwilling to touch aggressive businesses again to prevent a second crisis. In this context, the only way to maintain positive revenue growth is through squeezing liabilities and operating costs.
On the liability side, an aggressive cost restructuring took the lead. For a long time, Minsheng Bank's liability costs have been relatively high among joint-stock banks, with its interest-bearing liability cost rate ranking first among listed joint-stock banks in 2023. This high-cost structure is even more unfavorable in the current downturn, as high-cost liabilities inevitably require matching with high-yield assets, and high yields often accompany high risks. For Minsheng Bank, with its inherently fragile asset quality, this forced aggressive investment orientation could easily trigger new credit crises.
In 2025, Minsheng Bank began to make drastic cuts on the liability side. The bank forcibly reduced its deposit interest payment rate to 1.74%, a sharp drop of 40 basis points in a single year, leading to a reduction of 15.354 billion yuan in annual deposit interest expenses. In terms of retail and corporate structure, Minsheng Bank completely abandoned high-interest deposit-taking, turning instead to capturing low-cost corporate demand deposits through expanding high-frequency scenarios like supply chains and payroll services. Simultaneously, it reduced the average cost rate of interbank liabilities by 46 basis points to 1.81%. By the end of the first quarter of 2026, Minsheng Bank's personal deposit balance increased to 1,440.724 billion yuan, maintaining a slight growth of 3.63% against the backdrop of cost reduction, showing initial signs of "squeezing out the water."
Operating expenses for daily bank operations were also compressed. For the full year 2025, the bank's business and administrative expenses decreased by 0.61% year-on-year, and the cost-to-income ratio dropped to 35.70%. Entering the first quarter of 2026, Minsheng Bank's cost reduction momentum became even fiercer. Single-quarter business and administrative expenses were compressed to 9.804 billion yuan, and the cost-to-income ratio plummeted to 25.93%. A near 10-percentage-point drop in the cost-to-income ratio signifies tangible cuts in personnel, branch networks, and various middle- and back-office expenditures in the daily operations of a commercial bank.
By the end of 2025, Minsheng Bank's number of branches had decreased to 2,389, having closed over 70 inefficient outlets within two years. At the same time, the bank's total number of employees fell to 61,658, a net reduction of 1,832 in a single year. Additionally, AI technology is being deployed on a large scale to replace labor costs. In 2025, AI-generated code accounted for 20.68% of the bank's total code, and the AI substitution rate for IT services reached 28.9%. Through staff reduction for efficiency and machine takeover, the establishment and operation of physical branches have shifted to stricter per-unit productivity assessments. Given that Minsheng Bank's asset quality has not yet been completely repaired, the era of stringent cost control is expected to continue for a long time. "Living a tight life is the norm," Wang Xiaoyong stated, adding that "the future will ensure every cent of the company's money is spent on the critical edge driving transformation."
Apart from deteriorating asset quality, another major reason for Minsheng Bank's stagnation is the diminishing advantage of its once-proud micro and small enterprise (MSE) business. As one of the domestic commercial banks that established an MSE finance strategy relatively early, the bank once relied on its inclusive MSE business to obtain substantial risk premiums. However, in the current new cycle, interest rate spreads have been squeezed thin by fierce price wars.
Pricing data for credit allocation reflects competition on the asset side. In 2025, the average issuance rate for Minsheng Bank's inclusive MSE loans dropped to 3.50%, a sharp decline of 77 basis points in a single year. By the first quarter of 2026, this rate further decreased to 3.29%. The sharp drop in yield has destroyed the high-premium logic of the MSE business, and within this price range, fierce competition still exists among different types of commercial banks. For instance, large state-owned commercial banks can use their lower liability costs to capture the highest-quality MSE customers with inclusive loan rates around 3%. Meanwhile, local city commercial banks and rural commercial banks can rely on geographical advantages and personal networks to firmly occupy the lower-tier markets. Caught between these two forces, joint-stock banks that relied on high pricing to cover high risks are gradually losing their footing.
Analysis reveals that from 2020 to 2024, the regions where Minsheng Bank expanded its branches the fastest were concentrated in the western and northeastern regions, along with a few southern cities. This strategy showed some foresight: when financial institution distribution in economically developed regions tends towards saturation, and lacking business advantages to dig deeper, shifting focus to regions with limited coverage like the west and northeast to expand breadth can achieve differentiated competition. Unfortunately, Minsheng Bank's subsequent early investments in these lower-tier markets did not provide performance support during the downturn. From 2023 to 2025, the bank's operating revenue and profit contributions from the northeastern, central, and western regions were at the middle-to-lower or even bottom levels among all regions, with even asset quality performance being mediocre.
A banking compliance professional pointed out that for banks doing MSE business, interest income must cover three types of costs: funding, operations, and bad debts. "Many small business owners lack collateral, or their collateral is difficult to verify and dispose of. Their businesses are unstable, and their account books are not transparent. Such business carries relatively high risk." "It's not that large banks don't face risks doing this," the source added, "but first, they can choose not to do business that is too risky, and second, they have better monitoring methods. For example, data + intelligent risk control can replace relationship managers visiting sites. Previously hard-to-verify movable collateral can now also be monitored through technological means."
Against the backdrop of large state-owned banks often achieving over 10% growth in inclusive loans, Minsheng Bank's MSE foundation appears fatigued. By the end of 2025, its inclusive MSE loan balance increased by only 2.25% for the full year. In the first quarter of 2026, it grew by only 1.116 billion yuan. This almost stagnant scale performance indicates that its customer acquisition in lower-tier markets is facing significant resistance.
While scale growth stagnates, risks have not completely subsided. By the end of 2025, Minsheng Bank's NPL ratio for inclusive MSE loans rose to 1.52% from the previous year-end. By the end of the first quarter of 2026, this NPL ratio slightly increased further to 1.53%. The combination of declining returns and rebounding NPLs makes the profit erosion effect of the MSE business evident. Abandoning the belief in scale and shedding long-tail assets that cannot cover risk costs has become Minsheng Bank's inevitable choice to continue competing in the red ocean.
The failure of the old model has forced the bank to pin its hopes for reshaping its business foundation on technological transformation and supply chain finance. Constrained by scarce financial resources, Minsheng Bank's technology investment is highly pragmatic. In 2025, its information technology investment was 5.627 billion yuan, accounting for 3.94% of its operating revenue for the period, placing it in the middle range among 17 A-share listed banks that disclosed relevant data. Limited ammunition dictates that digital transformation cannot aim for full-scenario expansion but must focus directly on the core objective of reducing costs and increasing efficiency.
Minsheng Bank's Chief Information Officer Zhang Bin pointed out that the company established an AI engineer training and certification system in 2025 and formulated a collaborative mechanism between business analysts and intelligent solution architects to support the shift from business integration to business co-creation. Currently, Minsheng Bank's artificial intelligence technology is precisely deployed in business segments replacing manual work: in 2025, AI-generated code accounted for 20.68%, and the AI substitution rate for IT services reached 28.9%. In the first quarter of 2026, over 90% of wealth managers already use large language models as essential tools for daily proposal writing and customer group analysis.
While reducing internal costs, the external business logic has also changed. For example, at the intersection of corporate finance and MSE credit, the traditional approach targeting individual retail customers (C-end) has been completely abandoned, replaced by in-depth targeting of B-end supply chain ecosystems. By the end of the first quarter of 2026, the number of the bank's enterprise direct connection customers reached 9,962, with a single-quarter sequential growth rate as high as 8.70%. The Minsheng e-Home digital intelligence platform launched for small, medium, and micro enterprises has accumulated 75 functional points. It embeds the credit underlying system directly into the core enterprise's ERP, using real data flow within the closed loop to replace high-cost manual due diligence, thereby building a new business moat.
At this point, the main operational thrust of this joint-stock bank has become fully apparent. Behind Minsheng Bank's contrasting financial report of "revenue growth, profit decline" lies a brutal, large-scale balance sheet cleansing. The deep profit decline is the necessary pain of mine clearance. Only by thoroughly cleansing its financial statements can Minsheng Bank get back on the road.
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