Summary of Key Points
Minsheng Bank has the lowest price-to-book ratio among A-share listed banks (only 0.25 times, meaning you would need to pay 25 yuan for every 100 yuan in net assets). Despite issuing a “Valuation Improvement Plan” for two consecutive years, it has not managed to break out of its state of being valued below its book value. There are mainly four reasons for this:
1. Revenue growth has been accompanied by a continuous decline in profits due to significant provisions for bad asset losses.
2. There are underlying issues with the quality of its assets; the risks associated with real estate loans have not been fully resolved, and the credit card business is dragging down performance.
3. The company’s governance structure carries historical burdens, as outstanding loans from related shareholders have not yet been settled.
4. The valuation improvement plan lacks specific quantitative goals, leading to a lack of trust from the market.
Detailed Analysis
1. Revenue Growth, but Declining Profits? Bad Asset Disposal Takes the Brunt
Minsheng Bank’s revenue increased by 4.82% in 2025 (ending a four-year decline), yet its net profit decreased by 5.37%. The reason is that the bank made provisions of 53.95 billion yuan for credit impairment losses (preparing for loans that are unlikely to be recovered) and wrote off 66.154 billion yuan in bad debts (eliminating these loans from its books). While this approach can help the bank become more financially robust in the long run, in the short term, the funds used for these provisions reduce its profits.
Furthermore, the bank’s reserve coverage ratio (the proportion of reserves to potential bad debts) is near its lowest level—only 142% in the first quarter of 2026, just above the regulatory requirement of 120%. This means that if new bad debts arise, the bank may not have enough funds to cover them.
2. Dual Threats to Asset Quality: Real Estate and Credit Cards
Minsheng Bank’s bad assets mainly come from two sources:
- Real Estate Loans: Although the bad debt ratio decreased from 5.01% to 3.61% in 2025, the large amount of real estate loans and the slow process of selling mortgaged properties mean the risks have not completely disappeared. Investors are concerned that these loans could cause further problems in the future.
- Credit Card Business: The bad debt ratio for retail loans rose to 1.92%, primarily due to credit cards. Poor economic conditions have led some customers to struggle with repayments, a problem common across the industry, but Minsheng Bank is particularly affected.
These two factors make investors skeptical about the safety of Minsheng Bank’s assets and unwilling to assign it a high valuation.
3. Historical Governance Issues Left by Former Shareholders
Minsheng Bank was one of the first banks in China initiated by private capital, with a historically dispersed ownership structure. Many private shareholders (such as Panhai Group and Dongfang Group) borrowed large amounts from the bank. These shareholders later faced financial difficulties:
- Panhai Group owed Minsheng Bank over 10 billion yuan and is still unable to repay even 1.48 billion yuan, with no assets available for enforcement.
- Dongfang Group inflated its revenue by 16.1 billion yuan and owes Minsheng Bank 7.694 billion yuan, facing legal proceedings.
Although these high-risk shareholders have since withdrawn, the market remains concerned about whether Minsheng Bank’s governance has truly improved. Investors value transparency in bank management, and lack of it casts doubt on the bank’s reliability.
Additionally, executive compensation has been criticized; the chairman’s salary for 2025 was 3.29 million yuan, more than twice the industry average of 1.3 million yuan, which seems disproportionate given the declining profits.
4. Two Years of Valuation Improvement Plans, Yet No Market Buy-in
Minsheng Bank has issued valuation improvement plans for two years, but they mainly consist of general statements such as “promoting risk clearance and optimizing the business structure” without specific quantitative goals (e.g., how much the stock price should rise or how much net profit should increase). The bank has also refused to commit to a share repurchase plan, stating that there are no precedents for A-share banks to do so. Share repurchases signal confidence in a company’s future performance, and the lack of such plans suggests a lack of confidence.
Industry experts believe that restoring the bank’s valuation depends on rebuilding trust—questions like whether real estate-related risks have truly been mitigated, whether the reserve coverage ratio can be improved, and whether governance has become more transparent must be addressed before the market will give Minsheng Bank a higher valuation.
Conclusion
Minsheng Bank’s seemingly low price is not actually an opportunity; it reflects the market’s lack of confidence in its performance, asset quality, and governance capabilities. To break out of its current situation, the bank needs to take concrete actions such as clearing bad debts, resolving real estate-related risks, and improving transparency in its management. Only then will investors be willing to buy its stocks.