Key Takeaways:
Chongqing Rural Commercial Bank, China's largest listed rural lender by assets, laid out an ambitious roadmap to surpass 2 trillion yuan ($276 billion) in assets while weathering industry-wide pressure on profitability.
"If there are no major changes, we will maintain the current 'twice a year dividend' model and ratio," Chairman Liu Xiaojun said at the bank's 2025 annual earnings conference, his first since taking the helm. The bank has maintained a payout ratio above 30% since 2020.
The bank's forward guidance comes as its net interest margin (NIM) showed signs of stabilizing, contracting just 1 basis point in 2025 to 1.60%, a marked improvement from the 11-basis-point decline a year earlier. The lender's non-performing loan ratio fell for a fifth straight year to 1.08%, its lowest since listing, while its core Tier 1 capital adequacy ratio stood at a robust 12.67%.
At stake is the bank's ability to navigate the squeeze on interest margins that has plagued Chinese lenders. Chongqing Rural Bank's strategy hinges on a digital transformation to boost efficiency, a pivot to grow fee-based income from wealth management, and leveraging its vast network of over 1,700 branches to drive customer acquisition.
The bank is restructuring its technology operations to better integrate with business needs, a model described as allowing the front line to directly "call for artillery." This agile approach has already yielded results, with a first-quarter marketing campaign generating over 800 million yuan in consumption from 177 million yuan in expenses, a 4.64-times leverage. The campaign drove 21.2 billion yuan in total retail consumption across 110,000 merchants.
On the corporate side, a new tech-finance platform launched in June 2025 has helped the bank reach over 37,000 new clients and extend 12 billion yuan in new credit in just nine months by mapping out industrial chains for targeted marketing.
To counter the industry-wide margin compression, the bank aims to develop its intermediate income businesses into a new profit growth engine within two to three years. This involves a structural overhaul to establish wealth management departments in most branches and increasing the weight of commission and fee income in performance evaluations.
The bank's risk management has also improved, with its provision coverage ratio increasing by 3.82 percentage points to 367.26%. "We are fully promoting the construction of a new generation of digital risk control systems," Liu said, pointing to the "three downs and one up" scorecard of a lower NPL ratio, lower special-mention and overdue loan ratios, and a higher provision coverage ratio.
While committing to its dividend, Liu explained that the bank needs to retain sufficient capital to support lending growth, as its loan-to-asset ratio is currently below 50%. The bank's capital plan for the next three years will prioritize internal capital generation, supplemented by the potential issuance of Tier-2 capital instruments and perpetual bonds when market conditions are favorable.
This article is for informational purposes only and does not constitute investment advice.
