The narrowing in the decline of net interest margin: Zhejiang Merchant Bank’s new leadership explains the approach to stabilizing net interest margin, with a focus on developing low-capital intermediary businesses.

Caixin March 31 News (Reporter Guo Zishuo) On March 31, Zheshang Bank (601916.SH) held its 2025 annual performance briefing, marking the first public appearance of the new management team after adjustments.

The net interest margin decline has significantly narrowed, and the standards for identifying ineffective and low-efficiency assets will become stricter moving forward.

At the performance briefing, Zheshang Bank’s designated President Lu Linhua focused on addressing market concerns about the interest margin performance. In 2025, the bank’s net interest margin is projected to be 1.60%, a year-on-year decrease of about 11 basis points, compared to a 20 basis point decline in 2023 and a 30 basis point decline in 2024, with the decline clearly narrowing.

Lu Linhua stated that the narrowing of the net interest margin decline is mainly due to three efforts: first, strengthening pricing management for customers to curb the rapid downward trend in asset deployment prices; second, continuously managing the net interest margin during the process by establishing a comprehensive control mechanism from expectations, decomposition, monitoring to evaluation; third, optimizing the asset structure and increasing efforts to revitalize existing assets, with strict identification of ineffective and low-efficiency assets. “The standards for identification will only become stricter,” he said.

He also pointed out that the bank is gradually exiting high-yield assets previously deployed. Under a low-risk, balanced-yield strategy, the yields on newly deployed assets have decreased, and short-term net interest margins will still face pressure. However, in the long run, as the “anti-involution” efforts deepen, inflation expectations moderately rebound, and the cost of liabilities enters a downward channel, the bank’s net interest margin is expected to gradually stabilize.

To “eliminate unnecessary costs,” focusing on developing light capital and highly sticky intermediary businesses.

Looking ahead to 2026, Lu Linhua said Zheshang Bank will exert efforts on both assets and liabilities to fully stabilize the net interest margin, and on this basis, expand income sources from intermediary businesses to ensure steady and sustainable revenue. Regarding profits, the bank will continue to promote comprehensive risk and cost control, adhere to frugality, and “cut out unnecessary costs.”

In terms of intermediary businesses, Lu Linhua revealed that the bank is implementing a three-year plan to increase intermediary income, changing the previous reliance on asset deployment and credit expansion to drive intermediary revenue, with a focus on developing settlement, agency sales, custody, and other light-capital, highly sticky intermediary services while strengthening revenue and expenditure linkage and optimizing the structure.

Regarding future customer strategies, Lu Linhua clarified that the bank will focus on two major customer groups: corporate clients, emphasizing the new Zheshang group, and retail clients, focusing on serving the middle class, expanding the service scale for the middle-income population in the “olive-shaped” society. The goal is to keep the non-performing