Against the backdrop of weak macroeconomic recovery, the banking industry as a whole has faced many challenges in recent years, such as supplementing demand for effective credit, falling LPR, and falling fees. Operating pressure is a common phenomenon in the industry.

For the banking industry, in the current critical period when performance is bottoming out, the most important thing is whether it can control operating risks and improve asset quality, so as to gain greater growth elasticity in the future upward cycle of the industry.

The Bank of Zhengzhou's recent interim report may show us the strategic strength and resilience of a local commercial bank in an urban area.

1. The bottom of the industry cycle to create a foundation for quality development

On August 29, the Bank of Zhengzhou released its 2024 semi-annual report. In the first half of the year, the bank achieved revenue of 6.393 billion yuan and net profit of 1.649 billion yuan, which was in line with market expectations as a whole.

Under the policy guidance of continuing to benefit the real economy, interest spreads in the banking sector continued to narrow, compounded by weakening demand for effective credit, and the growth of banks' net interest income generally declined. This portion of revenue is the main source of the banking industry's overall revenue.

Therefore, it is not difficult to understand the current weak growth in commercial banking performance.

The net interest spread of the Bank of Zhengzhou has also narrowed, but thanks to good cost control, compared to the overall level of the industry, the Bank of Zhengzhou's performance still has a comparative advantage. In the first half of the year, the Bank of Zhengzhou's annualized net interest spread was 1.7%, higher than the average net interest spread of 1.45% for commercial banks in the same period.

At the same time, in order to offset the negative impact of narrowing interest spreads, the Bank of Zhengzhou actively adjusted its business structure and placed more emphasis on the non-interest income business. In the first half of the year, non-interest income was 1.098 billion yuan, an increase of 10.57% over the previous year.

Furthermore, the Bank of Zhengzhou has achieved steady growth in size.

As of June this year, Bank of Zhengzhou's total assets reached 645.68 billion yuan, an increase of 2.37% over the end of the previous year; total loans and advances issued were 372.828 billion yuan, an increase of 3.39% over the end of the previous year; and total liabilities were 589.356 billion yuan, up 2.25% from the end of the previous year.

What is most noteworthy is that the Bank of Zhengzhou's risk management level is steadily rising.

In the first half of the year, the Bank of Zhengzhou had a non-performing loan ratio of 1.87%, the same as at the end of last year; the provision coverage rate bucked the trend, increasing 16.6 percentage points over the end of 2023 to 191.47%. The capital adequacy ratio, Tier 1 capital adequacy ratio, and core Tier 1 capital adequacy ratio were 12.68%, 11.42%, and 9.26% respectively, all of which increased to varying degrees.

As can be seen, against the backdrop of increased uncertainty in the external environment, the Bank of Zhengzhou adheres to a prudent strategy, actively increasing capital strength, and improving the quality of risk management and control is the focus of current operations, which helps to consolidate the foundation for high-quality development.

2. Respond positively to national strategies and build long-term core competitiveness

For an industry such as banks that require a long period of time to observe obvious reform results, it is probably more important whether it has adopted a development strategy that meets social needs and satisfies its own endowment conditions compared to changes in short-term performance data.

As an urban commercial bank rooted in Henan, the Bank of Zhengzhou has a strategic vision of “striving to become a first-class commercial bank with distinctive characteristics in policy science and innovation finance business”, benefiting from improving the quality and efficiency of Henan's local economic development. Among them, as the capital of Henan Province, Zhengzhou is an important transportation hub at the national level and one of the central cities of the country. Its location advantages provide a foundation for high-quality growth for the development of the Bank of Zhengzhou.

Local industries are the foundation of the local economy. Injecting financial vitality into regional development is a responsibility and obligation that urban commercial banks should fulfill. It is also a gripper for the Bank of Zhengzhou to further cultivate the local economy. As of June this year, Bank of Zhengzhou's loan balance was 256.751 billion yuan, an increase of 8.04% over the previous year.

This is inseparable from the Bank of Zhengzhou's deep understanding of economic development trends. In order to do a good job in the five major articles on technology finance, green finance, inclusive finance, pension finance, and digital finance, the Bank of Zhengzhou is devoting more and more resources to the real economy such as technological innovation, green and low-carbon, advanced manufacturing, and the inclusion of small and micro enterprises.

For example, as the operator of policy science and innovation finance business in Henan Province, the Bank of Zhengzhou has focused on the field of technological innovation in financial services in recent years, providing a full range of financial services to technology enterprises. Its innovatively created science and innovation financial products have been well received by the market. As of the end of June, the Bank's policy science and innovation finance loan balance was RMB 38.322 billion, an increase of RMB 4.922 billion over the beginning of the year.

In addition to the corporate finance level, the Bank of Zhengzhou continues to promote retail transformation. As of the end of June, the total amount of personal deposits at Bank of Zhengzhou was RMB 199.539 billion, an increase of 18.32% over the end of the previous year; the size of personal loans was RMB 86.403 billion, an increase of 2.68% over the end of the previous year.

Specifically, in order to become a “citizen steward,” the Bank of Zhengzhou has built diversified consumption scenarios, covering various fields such as clothing, food, housing, travel, and entertainment, to promote the growth of the credit card business. During the reporting period, Bank of Zhengzhou credit card transactions amounted to RMB 8.856 billion and online transactions amounted to RMB 2.45 billion, an increase of 16.78% over the previous year.

At the same time, the Bank of Zhengzhou innovatively launched products such as “Zheng e-Loan” and “Housing e-Finance” to actively promote the implementation of inclusive finance and fulfill its responsibility as a “financing manager”. As of the end of June, the balance of inclusive small and micro loans was $51.596 billion, up 1.636 billion yuan from the end of the previous year, or 3.27%. It not only promoted its own business development, but also wrote a major article on inclusive finance.

Furthermore, the Bank of Zhengzhou has built a diversified and characteristic wealth management product system to meet the diversification of customers

Investment and financial management needs have created a good image of a “wealth manager” in the public mind. By the end of June, the Bank of Zhengzhou's wealth financial assets had reached 51.99 billion yuan.

Furthermore, by optimizing rural financial service channels and enhancing the rural financial service experience, the Bank of Zhengzhou has provided a “village steward” service, helping to comprehensively revitalize the countryside while raising the level of the county's economy. As of the first half of this year, the Bank of Zhengzhou issued a total of 0.217 million rural revitalization cards, an increase of 0.0452 million over the end of the previous year.

III. Concluding Remarks

Against the backdrop of weak macroeconomic recovery, the Bank of Zhengzhou's steady performance and strategic strength not only provided valuable experience for the same industry, but also provided useful inspiration for the future development of the entire financial industry.

The Bank of Zhengzhou has responded positively to the national strategy. Through measures such as supporting local industries, promoting retail transformation, and developing inclusive finance, the Bank of Zhengzhou has not only promoted the development of the local economy, but also enhanced its own market competitiveness. This approach, which closely integrates its own development with the national strategy, provides a new path for high-quality development for urban commercial banks and the banking industry as a whole.