In the face of the sudden attack from city commercial banks, Hua Xia Bank is launching a performance "defensive battle"

Under the reshuffling of commercial banks, the rise of city commercial banks is intensifying the growth anxiety of the lagging joint-stock banks.

Hua Xia Bank recently disclosed that its revenue and net profit attributable to shareholders for the first three quarters reached 64.881 billion yuan and 17.982 billion yuan, respectively, down 8.79% and 2.86% compared to the same period last year.

Among the 42 listed banks in A-shares, Hua Xia Bank ranked 40th and 37th in growth rates for these two metrics, showing significant fatigue in growth and lagging behind the vast majority of banks.

Since 2025, the shifting of rankings has become the main theme among commercial banks, whether it is Agricultural Bank surpassing Industrial and Commercial Bank in market value, or Jiangsu Bank surpassing Beijing Bank in scale, both signaling that "the strong may not always be strong" and the reshaping of core advantages;

Now, this trend has spread from similar types of commercial banks to city commercial banks and joint-stock banks.

In the first three quarters, under pressure, Hua Xia Bank has seen four city commercial banks—Ningbo Bank, Beijing Bank, Shanghai Bank, and Nanjing Bank—successfully overtake it in profit.

As of the end of the third quarter, Hua Xia Bank's asset quality performance was poor, with a non-performing loan ratio of 1.58%, the worst among A-share joint-stock banks.

Hua Xia Bank faces a dilemma:

If it sacrifices current risk control for growth, it will inevitably suffer more severe backlash if asset quality risks arise in the future;

If it strictly controls asset quality and slows down growth, the city commercial banks that have long been eyeing it may rush in, further eroding its market share in key battlegrounds like Beijing-Tianjin-Hebei and the Yangtze River Delta.

Under defensive pressure, Hua Xia Bank announced multiple personnel changes in October, involving operations, finance, and risk management;

Combined with the change of chairman at the beginning of the year, the bank has completed a management overhaul, aiming to resolve long-standing internal governance and risk control issues.

Profits "saved"

The first three quarters of 2025 marked the first time since 2010 that Hua Xia Bank reported a "double decline" in the third quarter.

However, behind this worst performance in years, there are also signs of reversal:

In the third quarter alone, Hua Xia Bank saw a significant divergence in revenue and profit growth, with revenue down 15.02% year-on-year, but net profit up 7.62%;

Since 2025, the year-on-year profit growth rates for the bank in the three quarters have been -14.04%, -2.48%, and 7.62%, indicating a V-shaped reversal from negative to positive.

However, it is noted that the marginal improvement in profit decline in the first three quarters mainly comes from cost-cutting rather than revenue generation:

In terms of revenue structure, the bank's net interest income, which contributes over 70% to its revenue, declined by 1.62% year-on-year;

Non-interest income grew by 8.33% to 4.694 billion yuan, but its business scale is relatively small, contributing only about 10% to total revenue;

Fair value changes, influenced by fluctuations in the bond market, decreased by 7.831 billion yuan year-on-year, significantly dragging down revenue The reversal of profit changes mainly relies on refined operations and provisioning feedback during the reform process:

First, cost reduction was implemented, with the "Nan Ni Wan" initiative launched this year to reduce costs and increase efficiency. An independent capital operation center was established in the organizational structure, and a Chief Operating Officer was appointed to support the new capital operation model. In the first three quarters, operating expenses decreased by 12.03% year-on-year;

Second, the provision for impairment was reduced, with credit impairment losses decreasing by 16.19% year-on-year, and the provision coverage ratio dropping from 161.89% at the beginning of the year to 149.33%.

Whether the profit rebound, lacking a growth engine, is sustainable remains questionable.

According to Xinfeng statistics, the core contribution rate of credit revenue for Hua Xia Bank has entered a contraction phase, declining from nearly 90% in 2020-2024 to less than 70%;

This is not due to the establishment of support from light asset businesses, but rather a passive decline in interest income caused by falling interest margins and a slowdown in balance sheet expansion. During the same period, the bank's net interest income growth rate continued to slow down, from an initial 26.96% to -11.89%.

By the end of the third quarter this year, the bank's net interest margin was 1.55%, positioned at a lower-middle level among peers, down 0.04 percentage points from the beginning of the year;

In the first three quarters, loans grew by 2.93% compared to the beginning of the year, maintaining balance sheet expansion but at a low growth rate, without adopting an aggressive strategy of compensating price with volume.

The management's cautious attitude towards expansion may be related to the current asset quality of Hua Xia Bank.

At the end of the third quarter, Hua Xia Bank's non-performing loan ratio was 1.58%, the worst level among A-share joint-stock banks, 0.63 percentage points higher than the best-performing China Merchants Bank;

During the same period, the capital adequacy ratio was only 12.63%, although higher than the regulatory requirement of 8%, it was still at the lower end among peers.

The lagging of these two data points indicates that Hua Xia Bank's ability to mitigate risks is weak, making it difficult to cope with the vicious cycle that blind expansion may cause. At this time, adopting a cautious strategy that emphasizes risk control and refined operations may indeed be a better choice.

In the past year (from October 30, 2024, to now), Hua Xia Bank has closed 24 branches and opened 4 new ones, showing an overall contraction in its branch structure;

In the absence of significant improvement in asset quality and capital replenishment levels, it may be difficult for Hua Xia Bank to shift towards substantial expansion.

Reform "Cutting Inward"

In recent years, when the banking industry has generally faced pressure, Hua Xia Bank's growth capability is not poor among joint-stock banks.

Xinfeng selected 9 A-share joint-stock banks and found that Hua Xia Bank's compound growth rates for revenue and net profit attributable to shareholders over the past three years (2021-2024) were 1.33% and 17.6%, respectively, ranking fourth among peers and at a mid-level;

During the same period, the bank's return on equity had a compound growth rate of 0.03%, making it the only company in the industry with a positive growth rate.

This leads to Hua Xia Bank's most pressing issue today not being growth, but rather the risk control that was overlooked during the rapid expansion phase, the accumulated non-performing burdens, and the relatively poor risk compensation ability.

The frequent emergence of compliance risks reflects a certain degree of inertia in losing control;

For example, in September this year, regulators issued a fine of nearly 90 million yuan for Hua Xia Bank's imprudent management of loans and other business operations and non-compliance in data reporting during the on-site inspection in 2023 Regarding historical issues, under the leadership of the new management team, Hua Xia Bank is undergoing a deep adjustment in its development approach—

At the beginning of 2025, former president of Beijing Bank, Yang Shujian, was parachuted into Hua Xia Bank as the party secretary and later appointed as chairman;

At the end of October of the same year, the bank announced three core executive appointments: former Chief Risk Officer Liu Xiaoli was transferred to the newly established position of Chief Operating Officer, "post-80s" Fang Yi from Beijing Bank took over as Chief Risk Officer, and Liu Yue, General Manager of the Asset and Liability Department, also assumed the role of Chief Financial Officer.

This executive reshuffle is seen as a key move for Hua Xia Bank to respond to performance pressure and promote governance upgrades.

Alongside the personnel reform, there is an optimization of the organizational structure.

At the end of September, the board of directors of Hua Xia Bank approved two proposals: the establishment of a capital operation center and the adjustment of the head office departmental organization:

Among them, the Planning and Finance Department will be split into the Financial Accounting Department and the Asset and Liability Management Department, the Trade Finance Department will merge with the Industrial Digital Finance Department to form the Transaction Banking Department, and the Consumer Rights Protection Department will be adjusted to a first-level department;

The Corporate Business Department will be renamed the Corporate Finance Department, the Data Finance Management Department will be renamed the Information Technology Management Department, and the Data Information Department will be renamed the Data Management Department.

Prior to this, the newly appointed chairman Yang Shujian initiated a major discussion on the "cutting inward" philosophy, proposing to step out of the comfort zone, open up new journeys, and emphasize the need to recognize the objective gap between itself and its peers.

As of the end of the third quarter, the bank has made phased progress in optimizing the quality of its existing assets, with the balance of special mention loans decreasing by 7.4% compared to the beginning of the year, accounting for 2.32%, and the balance of loss loans decreasing by 12.26%, accounting for 0.38%.

Management revealed that Hua Xia Bank's non-performing loans are mainly concentrated in the wholesale and retail industries, real estate, and other fields, which is basically consistent with market conditions, and stated that it will support and mitigate risks in real estate existing business according to the principle of "one household, one policy."

Time is running out

However, the time left for Hua Xia Bank to resolve its main contradictions is becoming increasingly urgent.

On one hand, the profit space that can be obtained through frugality is already limited:

By the end of the third quarter, Hua Xia Bank's provision coverage ratio had fallen below 150%, entering the regulatory requirement's minimum range of 120-150%, which means that the possibility of the bank relying on provisions to replenish profits in the future is minimal.

On the other hand, the pressure from latecomers is intensifying:

During the period of weak growth for state-owned banks, a large number of city commercial banks and rural commercial banks are still expanding rapidly;

According to Xinfeng statistics, there are still six city commercial banks, including Hangzhou Bank, and two rural commercial banks with a compound annual growth rate of net profit attributable to the parent company exceeding 15% over the past three years (2021-2024);

Three city commercial banks, including Hangzhou Bank, and two rural commercial banks have a compound annual growth rate of return on equity exceeding 10% over the past three years.

Leading city commercial banks based in economically developed regions have already begun to challenge the smaller-scale joint-stock banks:

As of the end of the third quarter of 2025, Hua Xia Bank's profits have been surpassed by five city commercial banks, and its asset scale has been surpassed by Jiangsu Bank and Beijing Bank.

More urgently, while Hua Xia Bank's growth is slowing, the aggressive latecomers are still in a phase of rapid growth: Currently, five city commercial banks have profits surpassing Hua Xia Bank, and their growth rates are far higher than that of Hua Xia Bank. Even the slowest growing Beijing Bank has a growth rate that exceeds Hua Xia Bank by 3.12 percentage points.

Hua Xia Bank's main battlegrounds are the Beijing-Tianjin-Hebei region and the Yangtze River Delta, with profit contribution rates of 51.26% and 32.54% respectively in the first half of the year. These two regions are also the main battlefields for five city commercial banks, including Beijing Bank, Jiangsu Bank, and Ningbo Bank.

Rowing against the current, if you do not advance, you will retreat—

If growth falls into a long-term stagnation, Hua Xia Bank's market share in the Beijing-Tianjin-Hebei and Yangtze River Delta regions may be further encroached upon;

However, the bank's current tight capital replenishment level cannot support more branch expansions in the western, northeastern regions, or county markets;

If Hua Xia Bank cannot quickly complete its reforms and return to a "self-sustaining" cycle, it may fall into a greater passive position.

Regarding future directions, Hua Xia Bank President Qu Gang revealed that retail transformation and digital risk control have become "bank-wide strategies," with new planning paths touching on the underlying logic of customer management and risk control.

In terms of strategic development direction, the bank will focus on serving new productive forces, increasing support for technological innovation, green finance, and other fields, while enhancing internal growth momentum through improved capital utilization efficiency and profitability.

As of October 30, Hua Xia Bank's PB ratio and PE ratio are 0.35 times and 3.73 times, respectively, both ranking at the bottom among peers.

In the future, whether this reform led by the new management can help Hua Xia Bank achieve a true breakthrough in the wave of transformation remains to be seen