Live Performance Review | "Don't chase quick profits, don't build big clients," Zhejiang Commercial Bank's 2025 performance report is released. The new leadership team responds to hot topics such as interest rate spreads and precious metals.

Reported by China Business News reporter | Li Yuwen ｜ Edited by China Business News editor | Huang Sheng

“In an industry environment where net interest margins continue to narrow, competition intensifies, and risk control faces mounting pressure, we have not blindly pursued a scale complex; we have not been overly focused on making quick money through short-term performance; and we have not taken the old road of building up large customers for the sake of expansion. Instead, we have upheld long-termism, solidified the foundation, adjusted the structure, strengthened compliance, and contained risks—achieving overall steady performance.” On March 31, Chen Haiqiang, Chairman of Zhejiang Commercial Bank, said at the bank’s 2025 annual performance briefing.

At the meeting, the newly appointed leadership team of Zhejiang Commercial Bank responded to hot-button issues such as performance figures that have drawn market attention and its operating strategy.

In 2025, Zhejiang Commercial Bank recorded operating income of RMB 62.514 billion and net profit attributable to shareholders of RMB 12.931 billion, with year-on-year declines. As of the end of 2025, the bank’s total assets were RMB 3.48 trillion, up 4.68% from the end of the previous year; its non-performing loan ratio was 1.36%, down 0.02 percentage points from the end of the previous year.

The narrowing in net interest margin is more pronounced and has moderated, but short-term pressure still remains

In 2025, Zhejiang Commercial Bank’s net interest margin was 1.6%, down 11 bps from the prior year. “Compared with the declines of 20 bps in 2023 and 30 bps in 2024, the magnitude of the net interest margin decline is clearly narrowing,” said Lü Linhua (proposed), President of Zhejiang Commercial Bank.

Lowering the deposit cost rate is an important measure for banks to ease net interest margin pressure. In 2025, Zhejiang Commercial Bank’s deposit cost rate fell by 32 bps year-on-year. When responding about the development of corporate business, Luo Feng, Vice President of Zhejiang Commercial Bank, said that by the end of 2025, the bank’s corporate deposit cost rate had been lowered to 1.61%, a drop of nearly 35 bps from the beginning of the year.

Regarding whether maturing deposits might leave, Luo Feng said that in 2025, some of the bank’s existing time deposits matured, but the overall capital retention rate remained at a high level, and the vast majority of maturing funds still stayed within the system. The reporter noted that as of the end of 2025, the proportion of corporate deposits in the bank’s total deposits exceeded 78%.

At the performance briefing, Lü Linhua elaborated in detail on the measures the bank took to address the narrowing of net interest margins from the asset side: first, strengthen pricing management for customers, and control the trend of asset deployment prices falling too quickly; second, continue to manage net interest margin throughout the process, establishing an end-to-end management mechanism covering expectation setting, decomposition, monitoring, and evaluation; third, optimize the structure, unlock and revitalize existing stock assets, and push hard to dispose of ineffective and inefficient assets. This year, the identification standards for inefficient assets have been made stricter.

When talking about net interest margin outlook, Lü Linhua said that each bank’s asset-liability structure and its own repricing cycles differ, leading to different net interest margin performance and operating patterns. Some of the higher-yield assets that Zhejiang Commercial Bank previously deployed are gradually exiting, and under a “low risk, evenly distributed returns” strategy, the yield on newly deployed assets has declined, so net interest margin remains under pressure in the short term. However, based on some measures already taken for the future and at present, we believe net interest margins in the banking industry will gradually stabilize.

Last year, fund-related business dragged down non-interest income; efforts are underway to develop fee businesses with “light assets” and high stickiness

In 2025, Zhejiang Commercial Bank’s operating income and net profit attributable to shareholders decreased year-on-year by 7.6% and 14.8%, respectively. Lü Linhua said this was mainly affected by two factors:

First, on interest income: the economy is still in a weak recovery stage. Effective demand for credit is gradually recovering, the industry’s trend of net interest margin narrowing continues, and Zhejiang Commercial Bank’s net interest margin changes generally follow the industry’s overall trend.

Second, on non-interest income: compared with the one-sided market in 2024, in 2025 the bond market saw wide-range swings and increased volatility, which significantly affected the returns of trading financial assets. In 2025, the decline in the bank’s net non-interest income approached 20%.

From the financial report data, fair value changes loss was the main drag on other non-interest income.

In response to questions related to the gold market business, Jing Feng, Vice President of Zhejiang Commercial Bank, provided more information. “One big part with a large year-on-year decline is the fund-related business, which is consistent with the trend across the whole market. On the one hand, absolute return yields tightened significantly; on the other hand, at the end of 2024 there were many unrealized fair value gains on the books. By the end of 2025, the traditional holdings’ base positions turned into a small unrealized loss. So, ‘in and out,’ the biggest variable factor is here.”

Jing Feng also mentioned that if we look at the specific structure of the gold market business, the traditional bond business recorded excess returns last year, thanks to building an investment research and trading system and engaging in band-based trading. Meanwhile, the foreign exchange business and others also maintained a relatively strong profitability level. He believed that in 2026, there will be greater uncertainty in global interest rates and asset price performance. “Against this backdrop, we will take a relatively cautious approach to investing in various types of assets, and we will also make the necessary contingency plans and response measures in parallel.”

When discussing the 2026 operating outlook, Lü Linhua said, “Regarding 2026 operating revenue for Zhejiang Commercial Bank, we still need to exert strong efforts on both the asset and liability sides. We must do everything we can to stabilize net interest margins. On that basis, we also need to enhance our sources of fee income to ensure our operating revenue is sound and sustainable. In terms of profit, we need to keep advancing comprehensive cost controls and continue to live tight—definitely squeeze out any unnecessary water from costs.”

Lü Linhua further said on “enhancing sources of fee income” that Zhejiang Commercial Bank is advancing a three-year fee-income enhancement initiative. “In this process, we have considered that we need to change the past situation where fee income improvement was driven by asset deployment and credit expansion. We will work hard to develop fee businesses with ‘light assets’ and high stickiness, such as settlement, agency sales, and custody. At the same time, we will strengthen linkage between revenue and expenses—calculate the spending behind every piece of fee income, so as to fine-tune the structure and increase the overall level of fee income.”

“A big variable from last year,” gold and precious metal trading volume expands 8-fold year-on-year

Since last year, gold prices have been volatile at high levels, drawing close attention from the market, which has also increased attention to banks’ precious metals business.

When responding to questions related to the gold market business, Jing Feng said that precious metals were “a big variable from last year,” and provided a detailed explanation of this segment.

He said that while maintaining the advantages of hedging transactions, last year Zhejiang Commercial Bank introduced a quantitative factor model for directional trading on top of traditional fundamental and technical analysis, making directional trading bigger and stronger. In 2025, the gold market showed a one-way upward trend. The bank firmly captured this hot行情, with full-year precious metals trading volume expanding 8-fold compared with 2024. Since the first quarter of 2026, market heat has continued.

It is worth noting that since the beginning of the year, gold prices have undergone several sharp fluctuations. In Jing Feng’s view, “this also served as a very good stress test and a test of our ability to respond.”

He believed that as market volatility increases, it is not ruled out that gold and certain other individual metals could present opportunities at certain stages in 2026. Zhejiang Commercial Bank will enhance the overall service capability of its precious metals business from two dimensions.

On the one hand, deepen the core capabilities of proprietary market-making and build a mechanism for profit growth. “Our trading capabilities accumulated in the precious metals market are the underlying capabilities that enable us to drive customer acquisition and conversion and provide customized services through internet channels,” he said. “We will continue to improve an integrated investment research and trading system, iterate the quantitative factor model, enhance our ability to respond quickly to the market, and accurately capture structural opportunities.”

On the other hand, optimize the ecological layout of client-driven business to empower the bank’s customer operations. Guided by customer needs, the bank will continue to enrich product systems such as gold accumulation plans, physical precious metals, precious metals leasing, and agency client trading, promoting product functionality iterations and improvements in system service capabilities. At the same time, focusing on real-economy needs, it will deepen the “one enterprise, one strategy” service model, providing tailored and comprehensive financial service solutions to customers across the entire precious metals industry chain.

Cover image source: Liu Jiakui