Recently, a number of private banks in China have released their latest financial results, revealing a notable divergence in their performancesWhile some banks are experiencing revenue growth without corresponding increases in profitability, others face declines in both revenue and net incomeIn stark contrast, there are a few private banks that have successfully achieved growth in both key financial metrics.

At the core of a bank's net profit is the net interest margin (NIM), an essential driver of their earningsGenerally, private banks in China exhibit a relatively high NIM, but the overall trend shows a rapid contraction in this metric over the past yearThe tightening of margins poses challenges, especially considering an increased competition among banks for deposits.

The phenomenon of larger banks absorbing loans and smaller banks attracting deposits has intensified since last December, when banks entered a typically competitive period often referred to as “opening red.” During this time, many small and midsize banks have raised their deposit interest rates to attract more fundsConversely, many private banks have chosen to reduce deposit rates instead, further complicating the landscape.

The divergence in performance among private banks becomes more apparent as they continue to publish their plans for issuing interbank certificates of deposit for 2025. A shining example is the Tianjin Jincheng Bank, one of the first private banks established in ChinaAccording to their recent disclosure, by the end of September 2024, their total assets reached 80.14 billion yuan, representing a 9.08% growth since the beginning of the yearHowever, despite the growth in assets and loans, the bank's net profit saw a sharp decline of 59.53% year-over-year, bringing the total to 172 million yuan.

Another private bank, Hunan Sanxiang Bank, disclosed similar trendsIts total assets amounted to 53.08 billion yuan at the end of September, with liabilities reaching 48.10 billion yuan

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In the third quarter, its revenue dropped by 2.86% year-over-year to 1.36 billion yuan, and net profit fell by 13.44% to 161 million yuanDespite the decrease, the bank reported a provision coverage ratio of 150.18%, indicating a relatively healthy outlook on asset quality.

Many banks, including Internet-based firms like Mybank, reported third-quarter results showcasing both revenue growth and a decline in net incomeMybank recorded a total operating income of 15.29 billion yuan for the period, marking a year-over-year increase of 14.3%, yet its net profit dropped by 17.43% to 2.26 billion yuanWenzhou Minsheng Bank also witnessed similar downward trends, with its net profit decreasing by 6.67%, while Jilin Yilian Bank saw a staggering 80.43% drop in net earnings.

Nonetheless, not all private banks face such dire situationsSome have reported robust double-digit growth in both revenues and net profitsFor instance, Suhang Bank highlighted the strength of its financials, reporting a total asset value of 137.2 billion yuan for the year, marking a consistent position among leading private banksIts loan balance increased by 12.08%, while total deposits rose by 17.35%, culminating in a total operating income of 5 billion yuan and a profit of 1.16 billion yuan, both reflecting enhancements over the previous year.

In light of the ongoing financial dynamics, another player, Zhongbang Bank, illustrated its robust performance by reporting a significant rise in its financial metrics as wellBy the end of 2024, it had managed to grow its total assets to 123.5 billion yuan, a 7.8% increase year-on-year, with net income rising by over 26% to 511 million yuan, demonstrating a successful navigation of the challenging landscape.

The adjustment of deposit rates during the “opening red” period showcases the complexity and strategic maneuvering among banksDespite pressures on net interest margins across the industry, private banks have exhibited mixed responses

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