Summary of Key Points
Nanjing Bank has embarked on a path to return to its traditional profit model starting in 2025: shifting away from non-traditional businesses such as financial markets and asset management, which it has focused on since 2016, and returning to its traditional “interest-generating businesses” (loans, bond investments, etc.). The data for the first half of 2026 is particularly illustrative: net interest income increased by 40%, rising from 54% to 69% of total revenue; non-interest income decreased by 24%, falling from 45% to 30%. This is the result of the new management's efforts to address the challenges of low interest rates and a shortage of high-quality assets. However, the bank still faces challenges such as narrowing interest margins, insufficient capital limiting expansion, and the comprehensive financial services not yet generating significant profits, meaning it is still some distance from achieving the dual-driven goal of “interest generation as the foundation + comprehensive value addition.”
I. How to Reap the Benefits of Returning to Traditional Business Models?
In simple terms, Nanjing Bank’s “return to traditional models” means that the proportion of income generated from interest has increased again.
In the first half of 2026, net interest income (interest earned from lending and bond investments minus interest paid to depositors) reached 21.9 billion yuan, a year-on-year increase of 40%, accounting for nearly 70% of total revenue; non-interest income (from fees, asset management, investment banking, etc.) was only 9.6 billion yuan, a decrease of 24%, accounting for 30%.
More importantly, this reversal of the trend is significant. Over the past eight years, the proportion of interest income has declined from 80% to 53% in 2024, while non-interest income has increased from 19% to 47%. In 2025, interest income increased by 31%, and non-interest income decreased by 12%, with the latter returning to 63%, a trend that continued in the first half of 2026.
This change is reflected in the asset structure: the growth rate of loans (10%) outpaced that of financial investments (6%) and total assets (7%), indicating that the bank has invested more in loan businesses that generate interest.
II. Why Return to Traditional Models?
Why did Nanjing Bank shift to non-traditional businesses in the first place? It was because the financial market was profitable around 2016. However, the environment has changed:
- Asset shortage in 2021: There was an abundance of funds, but few safe investment options.
- Ultra-low interest rates in 2024: Bond yields have become increasingly low.
- Even greater shortage of high-quality assets in 2025: Profits from financial investments have decreased.
The new management took office in 2024, with Xie Ning as the chairman and Zhu Gang as the president, and implemented the “1+10+N” reform. The core strategy is to “use interest-generating businesses as the foundation and comprehensive financial services to add value.” This does not mean abandoning non-traditional businesses, but rather to stabilize interest income first and then use investment banking, wealth management, and other services to provide additional value to customers.
For example, corporate loans accelerated in 2025 (up 16% in the first half of 2026), while personal loan growth slowed (3.68%), indicating that the bank is prioritizing interest income from corporate business.
III. What Drives the Growth of Interest-Generating Businesses?
The main drivers of interest income growth are increased lending and investment. However, there are two issues:
1. Narrowing interest margins: The bank’s net interest margin (the difference between interest earned and interest paid) decreased from 2.02% in 2021 to 1.62% in the first half of 2026, and the net interest rate spread also decreased from 2.25% to 1.79%. The slight improvement in the net interest margin in the first half of 2026 was due to deposit interest rates falling more than loan interest rates (liability costs decreased by 27 basis points, asset yields decreased by 25 basis points), but this trend is likely to continue in the long term.
2. Corporate loans dragging down returns: The interest rate on corporate loans (3.65% in the first half of 2026) is much lower than that on personal loans (6.47%), and the faster growth rate of corporate loans (16%) compared to personal loans (3.68%) has lowered the overall asset yield.
Another concern is insufficient capital: Banks need sufficient capital to make loans (as indicated by the core tier 1 capital ratio), which has remained around 9.3% for the past three years with little increase. If the bank continues to expand loans at a rapid pace and lacks sufficient capital, it will be constrained.
IV. What Is Still Missing for the Dual-Driven Model?
The management aims for a “dual-driven model” with both interest generation and comprehensive financial services adding value. However, so far, only the interest-generating businesses are contributing to profits:
- Although customer figures are promising: the retail AUM (managed assets) exceeded one trillion yuan in 2025, growing by 21%; the number of high-value retail customers increased by 17% in the first half of 2026, and the custody scale also grew.
- Non-interest income continues to decline: non-interest income decreased by 12% in 2025 and by 24% in the first half of 2026; fee income also decreased by 18% in the first half of 2026. This indicates that investment banking, wealth management, and other services have not yet converted into stable profit sources.
In short, only the “interest generation” aspect of the dual-driven model is currently active, while the “comprehensive financial services” aspect has not yet fully taken off. To achieve the dual-driven model, the bank needs to ensure that its comprehensive services truly create value for customers and generate profits.
Conclusion
Nanjing Bank has initially reaped benefits from returning to its traditional models, with increased interest income driving revenue growth. However, to establish a solid foundation in the long term, it must address the issues of narrowing interest margins, insufficient capital, and the lack of profitability from comprehensive financial services. Whether the “dual-driven model” can be successfully implemented will depend on the effectiveness of the management’s reforms.
(End of Article)
[Produced by Zhengjing Society]