"Not chasing quick profits, not stacking large clients," Zhejiang Commercial Bank's 2025 report card is out, and the new leadership team responds to hot topics such as interest rate spreads and precious metals.

National Daily Reporter | Li Yuwen National Daily Editor | Huang Sheng

“In an industry environment where interest rate spreads continue to narrow, industry competition intensifies, and risk prevention faces pressure, we have not blindly pursued scale obsession, nor overly focused on short-term performance for quick profits, nor taken the old path of big players. Instead, we adhere to long-termism, strengthen fundamentals, adjust structure, enhance compliance, and control risks, achieving overall stable performance,” said Chen Haiqiang, Chairman of Zhejiang Merchants Bank, at the bank’s 2025 annual performance briefing on March 31.

At the meeting, Zhejiang Merchants Bank’s new leadership team responded to hot topics such as performance results and business strategies that market attention.

In 2025, Zhejiang Merchants Bank achieved operating income of 62.51B yuan and net profit of 12.93B yuan, showing a slight decline year-over-year. As of the end of 2025, the bank’s total assets were 3.48 trillion yuan, up 4.68% from the previous year, with a non-performing loan ratio of 1.36%, down 0.02 percentage points from the end of the previous year.

In 2025, Zhejiang Merchants Bank’s net interest margin was 1.6%, down 11 basis points from the previous year. “Compared to a 20 basis point decline in 2023 and a 30 basis point decline in 2024, the narrowing of the interest spread is quite evident,” said Lu Linhua, President (proposed to be appointed).

Reducing deposit interest payout rates is an important measure for banks to ease interest spread pressure. In 2025, Zhejiang Merchants Bank’s deposit interest payout rate decreased by 32 basis points year-over-year. When responding to the development of corporate business, Vice President Luo Feng mentioned that by the end of 2025, the bank’s corporate deposit interest payout rate had been reduced to 1.61%, nearly 35 basis points lower than at the beginning of the year.

Regarding market concerns about whether maturing deposits will be lost, Luo Feng stated that some of the bank’s existing fixed-term deposits matured in 2025, but overall fund retention remained high, with most maturing funds still within the system. The reporter noted that by the end of 2025, corporate deposits accounted for over 78% of the total deposits.

Lu Linhua elaborated on measures taken from the asset side to address the narrowing interest spread: first, strengthening customer pricing management to control the rapid downward trend of asset deployment prices; second, continuously managing net interest margin during the process by establishing a full-process control mechanism from expectations, decomposition, monitoring to evaluation; third, optimizing structure by revitalizing existing assets and vigorously clearing ineffective and low-efficiency assets, with stricter standards for identifying low-efficiency assets this year.

Regarding the outlook for interest spreads, Lu Linhua believes that each bank’s asset-liability structure and re-pricing cycle differ, resulting in different net interest margin performance and operating patterns. Some high-yield assets previously invested by Zhejiang Merchants Bank are gradually exiting, while under the “low risk, average return” strategy, the yields of newly invested assets have decreased, so short-term net interest margins remain under pressure. However, based on future and current measures, he believes the net interest margin in the banking industry can gradually stabilize.

In 2025, Zhejiang Merchants Bank’s operating income and net profit attributable to the parent decreased by 7.6% and 14.8%, respectively. Lu Linhua said this was mainly influenced by two factors:

First, in terms of interest income, the economy is still in a weak recovery phase, with effective credit demand gradually recovering, and the trend of narrowing interest spreads in the banking industry continuing. The overall trend of Zhejiang Merchants Bank’s interest spread change is consistent with the industry.

Second, in terms of non-interest income, compared to the one-sided trend in 2024, the bond market experienced wide fluctuations and increased volatility in 2025, significantly impacting trading financial assets’ yields. The bank’s non-interest net income declined by nearly 20% in 2025.

From the financial data, fair value change losses are the main drag on other non-interest income.

Vice President Jing Feng provided more information when responding to questions about the financial market business. “Last year, a large decline was in fund-related business, which is consistent with the overall market trend. On one hand, absolute yield rates contracted significantly; on the other hand, at the end of 2024, there were large unrealized gains on fair value in the books. In comparison, the traditional holdings turned into slight unrealized losses by the end of 2025, so ‘buying and selling’ was a major variable factor here.”

Jing Feng also mentioned that, looking at the specific structure of the financial market business, traditional bond business through research and development systems and wave trading still recorded excess returns last year, contributing to year-over-year growth. Foreign exchange businesses also maintained good profitability. He believes that in 2026, global interest rate levels and asset prices will be more uncertain. “In this context, we will maintain a relatively cautious attitude toward investments in various assets and prepare corresponding plans and responses.”

Regarding the 2026 business outlook, Lu Linhua said, “In 2026, Zhejiang Merchants Bank will still need to make great efforts on both the asset and liability sides to stabilize net interest margins at all costs. On this basis, we also need to increase fee income sources to ensure steady and sustainable revenue. Additionally, for profits, we will continue to promote comprehensive cost control, tighten expenses, and eliminate unnecessary costs.”

Lu further explained the “enhancement of fee income” by stating that Zhejiang Merchants Bank is advancing a three-year plan to increase fee income. “In this process, we consider changing the past reliance on asset deployment and credit expansion to boost fee income. We aim to develop fee-based businesses such as settlement, agency sales, and custody—light assets with high stickiness. At the same time, we will strengthen revenue and expenditure linkage, carefully account for each fee income’s costs, optimize structure, and increase overall fee levels.”

Since last year, gold prices have fluctuated at high levels, attracting market attention, which has also increased focus on the bank’s precious metals business.

Jing Feng responded to questions about the financial market business, stating that precious metals were “a very significant variable last year,” and provided detailed elaboration.

He said that while maintaining advantages in hedging transactions, Zhejiang Merchants Bank introduced quantitative factor models based on fundamental and technical analysis to expand directional trading last year. The gold market showed a unilateral upward trend in 2025, and the bank capitalized on this hot trend, with trading volume of precious metals increasing eightfold compared to 2024. The market heat has continued into the first quarter of 2026.

It is worth noting that since the beginning of the year, gold prices have experienced several sharp fluctuations. Jing Feng sees this as “a good stress test and resilience check for our capabilities.”

He believes that with increased market volatility, there may be phased opportunities for gold and other metals in 2026. Zhejiang Merchants Bank will enhance its overall service capacity for precious metals from two dimensions.

One, deepen core capabilities in proprietary market-making, solidify profit growth mechanisms. “Our trading ability in precious metals, built on internet channels, is the foundation for attracting customers and providing specialized services,” he said. The bank will continue to improve integrated research, trading systems, iterate quantitative models, and enhance rapid market response to capture structural opportunities precisely.

The other, optimize the client-facing business ecosystem, empowering customer management across the bank. Based on customer needs, the bank will continuously enrich products such as accumulated gold, physical precious metals, metal leasing, and agency trading, promoting product iteration and system service improvements. It will also focus on real economy needs, deepen “one enterprise, one policy” service models, and provide customized, comprehensive financial services for clients across the entire precious metals industry chain.