Nanjing Bank's 3 Trillion Yuan Balance Sheet Surge: Volume-for-Price Strategy and Profit Smoothing Amid Net Interest Margin Pressure

Amid the banking sector facing dual pressures of narrowing net interest margins and an asset shortage, Bank of Nanjing has delivered a seemingly impressive performance report: As of the end of 2025, its total assets reached 3.02 trillion yuan, marking a significant year-on-year increase of 16.61%. By the end of the first quarter of 2026, this figure further climbed to 3.21 trillion yuan; On the revenue front, the bank achieved operating income of 55.542 billion yuan in 2025, up 10.48% year-on-year. In the first quarter of 2026, operating income reached 16.111 billion yuan, representing a remarkable year-on-year growth of 13.54%. The core driver behind this strong performance is the explosive growth in net interest income. Year-on-year growth rates for net interest income reached 31.08% in 2025 and 39.44% in the first quarter of 2026. However, this does not imply that Bank of Nanjing has mastered superior pricing power against the trend. In fact, the bank's net interest margin was 1.82% in 2025, a decline of 0.12 percentage points from the previous year. This represents a typical "volume-for-price" strategy built upon aggressive corporate lending. By the end of the first quarter of 2026, its corporate loan balance approached 1.2 trillion yuan, with growth rates in areas such as green finance and technology finance both exceeding 9%. Compared to double-digit revenue growth, Bank of Nanjing's profit growth appears quite "restrained." In 2025 and the first quarter of 2026, its year-on-year growth in net profit attributable to the parent company remained stable at 8.08% and 8.05%, respectively. Behind this steady fluctuation lies the rapid rise in credit impairment losses and the release of provisions acting as a "reservoir." In 2025 and the first quarter of 2026, Bank of Nanjing recognized credit impairment losses of 13.884 billion yuan and 4.442 billion yuan, respectively, surging by 31.91% and 40.09% year-on-year. To ensure stable profits while digesting massive impairment losses, management precisely utilized accumulated provision buffers over the years. Its provision coverage ratio dropped from 335.27% in 2024 to 313.62% by the end of 2025, and further declined to 306.81% by the end of the first quarter of 2026. Although this indicator still demonstrates strong risk mitigation capabilities, this model of "rising impairments offset by reverse-fed provisions" has diluted the quality of profits to some extent. Beneath the glamorous aggregate data, structural differentiation in asset quality and weakness in non-interest income are equally impossible to ignore. Financial market volatility significantly dragged down the bank's non-interest income. In 2025, its non-interest net income fell by 12.71% year-on-year. The primary reason was a sharp contraction in gains from changes in fair value; this item recorded a loss of 2.512 billion yuan in 2025, compared to a gain of 7.377 billion yuan in the same period last year, exposing the fragility of the trading book when facing market volatility. Meanwhile, asset quality in the retail and real estate sectors also faces certain pressures. While the overall non-performing loan (NPL) ratio remained stable at 0.83%, the NPL ratio for individual loans at the parent company rose to 1.49% in 2025, an increase of 0.20 percentage points from the end of the previous year. The NPL ratio for corporate loans directed towards real estate also reached 1.81%. Affected by market adjustments, there are signs of rising NPL ratios in mortgage-backed housing loans, consumer loans, and business operation loans. Additionally, the net cash flow from operating activities in the first quarter of 2026 decreased sharply by 67.03% year-on-year, indirectly reflecting pressure on the restructuring of interbank liability sources. In summary, Bank of Nanjing's current fundamentals exhibit distinct characteristics of "spear and shield." On one hand, it demonstrates strong capital supplementation and cost control execution. The 20 billion yuan "Nanjing Bank Convertible Bond" completed market-based conversion two years ahead of schedule, pushing the Tier 1 common equity ratio to 9.17% by the end of the first quarter of 2026, preparing ample ammunition for subsequent balance sheet expansion in core regions. Simultaneously, the cost-to-income ratio dropped to 20.90% in the first quarter, a significant decrease of 5.17 percentage points from the beginning of the year, demonstrating immediate results in expense management. On the other hand, the hidden danger lies in the actual consumption rate of asset quality. Rapid balance sheet expansion masks the surge in credit impairment losses. As long as the train of scale expansion does not slow down, the safety cushion of provisions can continue to support current profit commitments. However, facing structural changes in macro credit demand and marginal increases in retail NPLs, this financial model relying on depleting existing provisions to smooth profits may face more substantial stress tests in the future.