Huishang Bank <3698> positive profit alert

Huishang Bank <3698> positive profit alert

Huishang Bank Corp. Ltd. (3698.HK) reported a 3.8% year-on-year increase in net profit for the first half of 2025, reaching 9.3 billion yuan, despite slower growth in operating income and total assets. The bank’s operating income rose only 2.2% to 21 billion yuan, while total assets expanded by 17% year-on-year to 2.29764 trillion yuan by September 30, 2025 according to financial reports. This disparity highlights margin pressures driven by central bank interest rate cuts and intensified competition among lenders as reported.

Chinese banks, including Huishang, have faced declining net interest margins (NIMs) as lower loan rates reduce revenue. Huishang’s NIM fell 0.17 percentage points to 1.71% in 2024, down from 2.51% in 2019 according to analysis. The bank’s focus on corporate lending—targeting financially stable businesses—has helped maintain a low nonperforming loan (NPL) ratio of 0.98% as of June 2025, outperforming smaller peers like Yibin City Commercial Bank (1.68%) according to data. However, the bank restructured 9% more loans for struggling borrowers in 2024 compared to 2023, and “special mention” loans surged 62% to 1.13% of total loans, signaling rising borrower stress as documented.

Despite these challenges, Huishang’s shares rose over 5% following the profit update, though valuations remain subdued. The stock trades at a price-to-earnings (P/E) ratio of 3 and a price-to-book (P/B) ratio of 0.3, reflecting investor caution amid China’s economic slowdown according to market analysis. Analysts note that while the bank’s capital adequacy ratios comply with regulatory requirements as reported, sustained margin compression and credit risks could limit future growth.

The Bamboo Works, 2025
Longbridge, 2025