I'm a writer, little fun girl
On 18 august, nanjing bank issued a semi-annual financial report for 2026: business income of $31,596 million, net profit to the mother of $13,650 million, an increase of 10,94 per cent and 8. 17 per cent, respectively, over the same period; total assets stood at $3. 24 trillion. Looking at these numbers alone, the report card is pretty bright. However, a disturbing contradiction emerges from the careful dismantling of the financial statements: net interest differentials are still declining, while net interest earnings have risen by 40 per cent in reverse; net non-interest income has plummeted by nearly 25 per cent, with a sharp imbalance in the income structure; and core-level capital adequacy rates are declining the same time, and “ammunition” for asset expansion is being rapidly depleted。
This six-monthly report is a perfect example of a long-run runner who is sprinting, but is losing strength — still at speed and after questioning. There's a crack in the beautiful numbers。
To measure the price
A survival game to run faster
Look at the core contradiction. The net interest rate of nanjing bank was 1. 79 per cent in the first half of the year, a further decrease of 0. 03 percentage points compared to the beginning of the year. The continued downswing of the interest rate differential, which is the central profit indicator of the bank, means that the difference in the bank's “loan lending” is narrowing. Paradoxically, the net interest income amounted to $21,935 million, an increase of 40. 19 per cent over the same period and a sharp rise in the share of revenues to 69. 42 per cent。
Interest income rose sharply as a result of the decline in interest rates for only one reason: the plate was larger. By the end of june, the bank's assets totalled $3. 24 trillion, an increase of 7. 13 per cent over the beginning of the year; loans totalled $1. 57 trillion, an increase of 10. 07 per cent over the beginning of the year. The increase in loans won the increase in assets and the increase in deposits. Nanjing bank is the only disclosed listed bank that has achieved faster growth in loans than deposits. It's a "supplied price" -- a single profit margin, then a few more。
There is a flag for public loans. The balance of corporate loans stood at $12. 2 trillion, an increase of 12. 33 per cent over the same year, and the share of total loans rose to 78. 05 per cent; while retail loans were also growing, they were growing at a rate of 2. 72 per cent, clearly behind that of the public. In other words, nanjing bank is placing chips on public business. In the overall downward environment of loan interest rates, growth in size and changes in asset structure have become important ways of maintaining interest income, and the rapid expansion of public loans has to some extent reversed downward pressure on lending pricing。
But there is a fatal question about this path: expansion has limits. Every penny of asset expansion requires an additional cent of capital. The capital, on the other hand, is the tightest “lines” of the nanjing bank。
Covered cracks
Downfall, capital pressure
Interest income had raised the profile, but another piece of income had collapsed quietly. The net non-interest income of nanjing bank for the first half of the year was 9,961 million yuan, a decrease of 24. 73 per cent over the same period. Of these, the net revenue from fees and commissions decreased by 18. 5 per cent on a year-on-year basis, and the decline in loan guarantees and bond underwriting was a major drag。
An over-reliance on interest income by a bank is essentially an “interest differential” diet — a slight fluctuation in interest rates and a sharp shock in profits. Intermediate operating income, including finance management, hosting, underwriting, etc., is the key indicator of a bank's ability to provide integrated services and to resist cycles. The decline of almost 20 per cent in the median yield suggests that the nanjing bank's “second growth curve” has not really grown。
Look at capital. At the core level, the capital adequacy rate was 9. 37 per cent, which, while meeting regulatory requirements, was lower than in the same period last year. Capital adequacy at the core level is the “security cushion” at the heart of the bank, which means that banks are consuming their “households” to support expansion. Assets grew by 7. 13 per cent and loans by 10. 07 per cent, but core capital did not keep pace。
It's a typical signal of "too fast to keep up." more interestingly, there was a 2. 65 per cent decline in the average share of income — profits were growing, but less money was distributed. This suggests that the increase in net profits has been diluted by the expansion of equity and that the pace of earning money has not kept pace with the increase in “concords”。
Quality of assets: a robust surface with a dark stream
The rate of non-performing loans was 0. 82 per cent, a decrease of 0. 01 percentage points compared with the beginning of the year; the coverage rate was 306. 11 per cent, although it was 7. 51 percentage points lower than at the beginning of the year, but it remained at a high level; and the proportion of loans of concern was optimized simultaneously. In terms of these indicators, the bank's assets are of sound quality。
However, looking at the structure, the public bad rate rose by one basis point to 0. 64 per cent from the beginning of the year. It's a small scale, but it's an alarming direction. – the share of public loans has reached 78 per cent, and if the public bad rate continues to rise, risk is highly concentrated. The negative retail rate has improved, from 1. 49 per cent at the beginning of the year to 1. 42 per cent, but the increase in retail loans has been only 2. 72 per cent, limited in scale and not significant in absolute terms。
A further detail is that nanjing bank has increased the cancellation of non-performing loans, with annualized credit costs increasing by approximately eight basis points each year in the second quarter alone. The write-off was to remove the identified bad from the books and to be amenable to the bad rate, but it consumed the provision. The provisioning coverage is declining, indicating that “ammunition” is decreasing。
If a picture of nanjing bank were to be painted, it would probably be the case that the profits were double, that the net interest differential was good in the industry, that the negative rate continued to decline and that shareholders were growing. It all looks like a good student. But this “good student” also has problems。
Growth is largely based on the size of the pile. Net interest income increased by 40 per cent, thanks to the rapid expansion of assets and improved liability costs. But expansion consumes capital, and capital adequacy is under pressure, and this path cannot continue. The structure is also unbalanced. The share of public loans is 78 per cent, the share of revenue is declining, the source of income is becoming more and more monolithic, and the more the business structure of one bank is, the less risk-resistant. The quality of growth is even more questionable. Each share is declining, roa and roe are declining, profits are increasing, but the efficiency of earning money is decreasing。
It's not just about nanjing bank. The banking sector as a whole is under pressure to narrow interest-rate differentials, and “to pay off” is a common option for almost all banks. But the "compensation price" is a marathon, not as fast as it goes, but as long as it goes. The nanjing bank has chosen the male runway with significant short-term results, but in the long term, balancing size with capital, public and retail, interest and non-interest is the real question。
