Risk Clearing in Order, Is Xiamen Bank Meeting a Repair Inflection Point?

(Source: China Visit Network Finance)

Xiamen Bank’s rebound path does not require pursuing dramatic short-term indicator reversals but should focus on steady, gradual recovery and structural optimization.

Produced by | China Visit Network

Reviewed by | Li Xiaoyan

Recently, a public notice regarding the enforcement of a loan contract dispute involving over 400 million yuan once again drew market attention to this listed city commercial bank from Fujian. Against the backdrop of narrowing interest spreads and increasing pressure on asset quality management industry-wide, Xiamen Bank’s phased performance fluctuations and isolated risk events are seen by outsiders as a “stress test” on its development path.

Objectively speaking, the challenges currently faced by Xiamen Bank include common pressures from macroeconomic environment and industry cycles, as well as short-term pains during its business restructuring. However, through financial reports and operational actions, it’s clear that the bank has not stagnated under pressure but has taken a more cautious approach to strengthen risk control, optimize asset-liability structure, and deepen regional real economy engagement. Short-term bottoming does not mean a decline in growth momentum; instead, it creates conditions for subsequent lightening of operations and steady recovery. As the saying goes, “Talents abound in Jiangdong, and a comeback is unpredictable,” Xiamen Bank is leveraging its regional advantages, adhering to compliance, and continuously refining its operations, walking a high-quality development path of solid foundation, repair, and quality improvement.

The disclosure of this litigation reflects Xiamen Bank’s transparency and proactive risk management. The announcement shows that, due to the relevant enterprise’s failure to fulfill payment obligations on time, the bank has applied for court enforcement, involving a principal amount of 418.6765 million yuan plus interest, penalties, etc. In response to this risk, the bank has promptly and fully provisioned for impairments and clearly stated that this lawsuit will not significantly impact current or future profits.

This approach demonstrates Xiamen Bank’s mature risk prediction and provisioning buffer capacity. Even when facing large single credit risks, the bank can minimize operational impact through prudent pre-provisioning and legal recovery afterward, showcasing the professionalism of a listed bank in compliance and risk resolution. Bringing risks to the table and advancing disposal in accordance with laws and regulations reflects prudent management and governance, not signals of risk out of control.

Looking at the first half of 2025, Xiamen Bank has indeed delivered a somewhat challenging performance report since its listing. Operating income reached 2.689 billion yuan, down 7.02% year-over-year; net profit attributable to the parent company was 1.158 billion yuan, down 4.59%. Meanwhile, the non-performing loan ratio rose 0.09 percentage points to 0.83%, and the provision coverage ratio fell to 321.67%, indicating phased adjustments in several indicators.

However, interpreting these figures within the broader industry context allows for a more rational understanding of their fluctuations. In the first half of 2025, the entire banking sector faced sustained pressure from declining net interest margins, with the national average dropping to a historic low of 1.42%. Under this environment, Xiamen Bank’s net interest margin slightly decreased from 1.14% to 1.08%, and its net interest spread from 1.06% to 1.04%, with overall moderate declines. Notably, its net interest margin rebounded by 4 basis points from Q1 to Q2, indicating that its asset-liability management strategies are taking effect and that the margin bottom has stabilized.

Further analysis of revenue structure reveals that the core of profit pressure is not a sharp slowdown in credit business but market disturbances affecting non-interest income. In the first half, non-interest net income dropped 21.72% year-over-year, with gains and losses from fair value changes turning negative, becoming the main drag on revenue. This reflects the sensitivity of financial market activities to external interest rate environments and also indicates that the bank’s traditional lending business remains stable, with its profit base intact.

In terms of profit performance, total profit declined more than net profit, mainly due to reasonable adjustments in income tax expenses. While this is a financial optimization, it also provides a buffer for the bank to maintain profitability and capital strength during industry downturns, creating conditions for continued investment in the real economy and business structure optimization.

Regarding asset quality, the market’s concern over the decline in the provision coverage ratio from a high of nearly 400% to 321.67% is understandable. This reduction somewhat decreases future risk buffers. Objectively, however, this level remains well above the regulatory red line of 120% and significantly better than industry averages, maintaining a solid risk resistance bottom line. Additionally, the “double decline” in the balance and proportion of watchlist loans suggests a mitigation of potential asset risks, with a marginal improvement trend in asset quality. Although non-performing loans have increased, they are mainly concentrated in cyclical industries like manufacturing and wholesale retail, consistent with the current economic recovery phase, without signs of regional or systemic risk spreading.

Facing these challenges, Xiamen Bank’s response is clear and solid, especially in controlling liability costs. Data shows that in the first half, the bank’s average interest paid on deposits decreased year-over-year; corporate deposit interest rates dropped by 38 basis points, and personal deposit interest rates fell by 16 basis points. This significant cost reduction on the liability side provides a solid foundation for stabilizing net interest margins and improving profitability, demonstrating the bank’s refined management of customer base, deposit structure, and funding pricing.

As a city commercial bank rooted in Xiamen and serving the Haixi economic zone, regional advantage remains Xiamen Bank’s most core and enduring competitive edge. The active private economy, developed foreign trade, and dense Taiwanese enterprises in Fujian and Xiamen provide broad business opportunities. The half-year report shows that the bank’s corporate loans grew by 17.21%, green loans by 29.58%, and technology loans by 18.59%, with credit resources precisely directed toward policy-supported, promising real sectors, aligning with regulatory guidance and ensuring stable income and deposit accumulation.

Looking ahead, Xiamen Bank’s path to recovery does not require dramatic short-term indicator swings but should focus on steady, structural improvements. On the liability side, it will continue to deepen local operations, leveraging transaction banking, cash management, payroll services, and other basic businesses to expand low-cost settlement deposits and strengthen low-cost funding advantages. On the asset side, it will avoid reckless scale expansion, instead enhancing risk pricing capabilities and channeling more resources into quality manufacturing, green finance, tech finance, and Taiwanese enterprise finance, improving asset yield and risk matching. Additionally, it will moderately optimize financial market strategies, strengthen investment portfolio stability, smooth non-interest income fluctuations, and promote a more balanced profit structure.

Banking development is never a 100-meter sprint but a marathon testing endurance, resolve, and professionalism. After undergoing phased adjustments, Xiamen Bank is at a critical stage of “solidifying the foundation, optimizing structure, and honing internal skills.” Proper handling of isolated risk events and rational short-term performance fluctuations are normal stages of development, involving risk release and clearance.

In the future, with regional economic continued recovery, interest margin stabilization, and ongoing asset-liability optimization, Xiamen Bank is expected to turn its current “valley” performance into a “reservoir” for future growth, leveraging its solid customer base, regional特色, and improved management.

After the storm comes clear skies; after adjustments, there is a leap forward. By staying true to its mission of serving the local community, real economy, and citizens, maintaining stability, and enhancing competitiveness, Xiamen Bank is fully capable of steadily restoring its performance, carving out a unique path of value appreciation in regional finance, and delivering a more stable and high-quality development report to the market and investors.