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.

By ｜Li Yuwen    By @E1@｜Huang Sheng

“In an industry environment where the net interest margin continues to narrow, competition intensifies, and risk control faces mounting pressure, we have not mindlessly pursued growth for growth’s sake; we have not overfocused on grabbing quick profits from short-term performance; and we have not taken the old road of building up big customers. Instead, we have stayed committed to a long-term approach—strengthening our fundamentals, optimizing our structure, boosting compliance, and controlling risks—achieving an overall steady performance.” @E2@ Chen Haiqiang, Chairman of @E3@ Zhejiang Cathay Bank, said at the bank’s 2025 annual performance briefing on March 31.

At the briefing, Zhejiang Cathay Bank’s newly appointed leadership team responded to hot-button issues that the market has been paying attention to, including the performance situation and operating strategies.

In 2025, Zhejiang Cathay Bank reported operating income of RMB 62.514 billion and net profit attributable to shareholders of RMB 12.931 billion, both down year over year. By the end of 2025, the bank’s total assets were RMB 3.48 trillion, up 4.68% from the end of the prior year. The non-performing loan ratio was 1.36%, down 0.02 percentage points from the end of the prior year.

The decline in the net interest margin has narrowed noticeably, but there is still some near-term pressure

In 2025, Zhejiang Cathay Bank’s net interest margin was 1.6%, down 11 basis points (BP) from the previous year. “Compared with the magnitude of declines in 2023 (down 20 BP) and 2024 (down 30 BP), the narrowing in the net interest margin decline is clearly evident.” said Lü Linhua (appointed), President of Zhejiang Cathay Bank.

Reducing the deposit interest expense ratio is an important measure for banks to alleviate net interest margin pressure. In 2025, Zhejiang Cathay Bank’s deposit interest expense ratio fell 32 BP year over year. In responding to questions about the development of corporate banking, Deputy President Luo Feng said that by the end of 2025, the bank’s corporate deposit interest expense ratio had been reduced to 1.61%, down nearly 35 BP from the beginning of the year.

Regarding whether maturing deposits will be lost—an issue the market is concerned about—Luo Feng said that in 2025, some existing time deposits of the bank matured, and the overall funds retention rate remained at a high level. Most of the maturing funds still stayed within the system. The reporter noted that by the end of 2025, the share 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 has taken to address the narrowing of the net interest margin from the asset side: first, strengthen pricing management for customers and curb the trend of asset placement prices falling too fast; second, continue to manage net interest margin throughout the process by establishing an end-to-end management mechanism covering expectations, decomposition, monitoring, and evaluation; third, optimize the structure, activate existing assets, and actively dispose of ineffective and low-efficiency assets. This year, the standards for identifying low-efficiency assets are even stricter.

When asked about its outlook for net interest margin, Lü Linhua believes that each bank’s asset-liability structure and its own repricing cycle differ, leading to different net interest margin performance and operating patterns. Some of the higher-yield assets Zhejiang Cathay Bank previously deployed are gradually exiting. Meanwhile, under a strategy of “low risk and fairly even returns,” the yield on newly deployed assets has declined, so net interest margin remains under pressure in the near term. However, judging from the measures already taken for the future and the present, the bank believes that in the future the net interest margin in the banking industry can gradually stabilize.

In 2025, fund-related business dragged down non-interest income; the bank works to develop fee-based services with light-asset and high-stickiness characteristics

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

First, on interest income: the economy is still in a weak recovery stage. Effective credit demand is gradually recovering. The trend of the banking industry’s net interest margin continuing to narrow persists, and Zhejiang Cathay Bank’s net interest margin changes follow the industry’s overall trend.

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

Based on the financial statement data, fair value changes loss is the main drag on other non-interest income.

Deputy President Jing Feng of Zhejiang Cathay Bank provided more information when responding to questions related to the gold market business. “The biggest piece with a large year-over-year decline was the fund-related business, which is consistent with the trend across the whole market. On one hand, absolute return yields narrowed significantly; on the other hand, at the end of 2024 there were a large amount of unrealized fair value gains on the books. Compared with that, the underlying positions of traditional holdings turned into slight unrealized losses by the end of 2025. So ‘in and out’—the biggest variable lies here.”

Jing Feng also noted that if one looks at the specific structure of the gold market business, traditional bond business still recorded excess returns last year, driven by a research and development/investment-and-research system and banded (trading) strategies. The contribution was also up year over year. The foreign exchange business and others also maintained relatively good profitability. He believes that in 2026, global interest rates and asset price performance will involve greater uncertainty. “Against this backdrop, in our investments across various asset classes, we will maintain a relatively prudent stance, and we will also make corresponding plans and response measures.”

When discussing the operating outlook for 2026, Lü Linhua said, “For 2026, in terms of operating income, we still need to work hard on both ends—assets and liabilities. We must spare no effort to keep the net interest margin stable. On that basis, we also need to increase our sources of fee income to ensure our operating income is sound and sustainable. In addition, on the profit side, we need to keep pushing forward with comprehensive cost control—continue to live tightly—and we must squeeze out any unnecessary ‘fat’ in costs.”

Further regarding “enhancing sources of fee income,” Lü Linhua said Zhejiang Cathay Bank is advancing a three-year action plan to enhance fee income. “In this process, we have a consideration: we need to change the phenomenon in the past where fee income improvement was driven by asset placement and credit expansion. We will strive to develop light-asset, high-stickiness fee-based businesses such as settlement, agency distribution, and custody. At the same time, we will strengthen linkages between revenue and expense: we need to work out the costs behind every transaction that generates fee income, so as to optimize the structure and increase the bank’s overall level.”

“A major variable from last year,” the gold and precious metals trading volume expanded 8-fold year over year

Since last year, gold prices have been volatile at high levels and have drawn significant market attention, which has also led to greater attention on banks’ precious metals business.

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

He said that while maintaining the advantage of hedging transactions, last year Zhejiang Cathay Bank introduced a quantitative factor model on top of traditional fundamental and technical analysis to build up and strengthen directional trading. In 2025, the gold market showed a one-way upward trend. The bank firmly seized this hot market. The bank’s full-year trading volume of precious metals increased 8-fold compared with 2024, and market heat has continued to carry into the period since the first quarter of 2026.

Worth noting is that since the beginning of the year, gold prices have experienced several sharp swings. In Jing Feng’s view, “this was also a very good pressure test and a test of our ability to respond.”

He believes that as market volatility intensifies, it is not excluded that gold and certain other individual metals may present opportunities for a certain period in 2026. Zhejiang Cathay Bank will enhance its overall service capability in the precious metals business from two dimensions.

On one hand, deepen the core capabilities of the bank’s own proprietary market-making business and build a profit growth mechanism. “The trading capabilities we have accumulated in the precious metals market are the underlying capabilities that enable us to do lead generation and conversion through internet channels and provide service for special needs.” he said. The bank will continue to improve an integrated research-and-trading system, iterate the quantitative factor model, enhance its ability to respond quickly to the market, and precisely capture structural opportunities.

On the other hand, optimize the eco-layout of businesses serving customers and empower customer operations across the whole bank. Oriented by customer needs, the bank will continue to enrich product systems such as allocated gold (precious metals held/allocated for clients), physical precious metals, precious metals leasing, and agency trading, and drive functional iteration of products and improvements in system service capabilities. At the same time, focusing on the real economy’s demand, it will deepen the “one enterprise, one policy” service model, providing customized and comprehensive financial service solutions to customers across the entire precious metals industry chain.

Cover image source: Liu Jiakui