Bank of Hangzhou H1 net profit rises nearly 10% to 12.8 billion yuan; capital adequacy ratio declines for fourth straight quarter — BigGo Finance

Bank of Hangzhou (600926.SS), a Chinese city commercial bank, disclosed its 2026 semi-annual report on the evening of August 26. The bank posted operating revenue of 21.05 billion yuan (approximately $3.1 billion) for the first half, up 4.75% year-on-year, and net profit attributable to shareholders of the listed company of 12.81 billion yuan (approximately $1.9 billion), up 9.87% year-on-year. Revenue growth accelerated notably from the 1.09% full-year pace in 2025, driven primarily by a year-on-year improvement in net interest margin and steady expansion of the asset base.

Profitability indicators, however, continued to trend lower. The weighted average return on equity attributable to common shareholders (non-annualized) for the first half was 8.87%, down 0.63 percentage points year-on-year. Meanwhile, the bank’s capital adequacy ratio and core Tier 1 capital adequacy ratio stood at 13.99% and 9.52% respectively, down 0.38 and 0.07 percentage points from the beginning of the year, marking four consecutive quarters of decline.

Net interest income anchors growth; non-interest income contracts sharply

By revenue mix, net interest income reached 15.6 billion yuan (approximately $2.3 billion) in the first half, up 19.17% year-on-year, accounting for 74.11% of operating revenue — an increase of 8.97 percentage points from the same period last year. Net interest margin was 1.39%, up 4 basis points year-on-year, while net interest spread was 1.36%, down 1 basis point year-on-year.

Non-interest income fell 22.20% year-on-year to 5.45 billion yuan (approximately $810.9 million), dragged down primarily by a sharp contraction in investment income. Investment income for the first half was 2.37 billion yuan (approximately $352.1 million), a decline of 3.36 billion yuan from the prior-year period, representing a 58.66% drop. Fair value changes on financial instruments swung to a gain of 177 million yuan (approximately $26.3 million) from a loss a year earlier, partially offsetting the decline in investment income.

Fee and commission income maintained robust growth, rising 19.50% year-on-year to 3.36 billion yuan (approximately $500.3 million) in the first half. Among this, custody and other fiduciary business commission income rose 47.92% year-on-year, mainly benefiting from higher wealth management fee income.

Lending skews corporate-strong, retail-weak

As of end-June, Bank of Hangzhou’s total assets reached 2.47 trillion yuan (approximately $367.3 billion), up 4.46% from the beginning of the year and 10.40% year-on-year, approaching the 2.5 trillion yuan threshold. Total loans and advances stood at 1.16 trillion yuan (approximately $173.0 billion), up 8.43% from the start of the year, with the loan-to-asset ratio rising 1.73 percentage points to 47.09%.

The credit structure showed a pronounced divergence. Corporate loan balances totaled 878.59 billion yuan (approximately $130.7 billion), an increase of 108.72 billion yuan (approximately $16.2 billion) from the beginning of the year, or 14.12%. The top two sectors by allocation were water conservancy, environmental and public facilities management, and leasing and business services, which together accounted for 59.8% of total corporate loans.

By contrast, personal loan balances stood at 283.69 billion yuan (approximately $42.2 billion), down 18.32 billion yuan (approximately $2.7 billion) from the start of the year, a decline of 6.06%. Within this, personal mortgage loans decreased by 6 billion yuan (approximately $892.2 million), and personal business loans decreased by 12.96 billion yuan (approximately $1.9 billion). The deposit side similarly showed a “corporate down, retail up” pattern: corporate customer deposits totaled 961.9 billion yuan (approximately $143.1 billion), down 5.33% from the beginning of the year, while personal deposits reached 398.3 billion yuan (approximately $59.3 billion), up 10.41%.

Asset quality stable; provision coverage ratio falls below 500% for first time in five years

On asset quality, the non-performing loan (NPL) ratio at end-June was 0.76%, flat with the beginning of the year. The corporate loan NPL ratio was 0.53%, down 0.05 percentage points from the start of the year, while the retail loan NPL ratio rose 0.27 percentage points to 1.48%, mainly affected by risk exposure in personal business loans and mortgage loans, with their NPL ratios rising 0.56 and 0.24 percentage points to 2.08% and 0.95% respectively.

Risk-buffering capacity showed marginal changes. The provision coverage ratio at end-June was 471.96%, down 30.28 percentage points from the beginning of the year. While still at a relatively high level, this marked the first time in nearly five years that the ratio fell below the 500% threshold. The underlying reasons were a continued weakening in credit impairment provisioning and an increase in non-performing loan balances. Credit impairment losses in the first half fell sharply by 49.31% year-on-year to 853 million yuan (approximately $126.9 million), representing only 4.05% of operating revenue, compared with a peak of over 38% in the same period of 2020.

Wealth management growth stalls; distribution business expands against the trend

Operating data from Hangzhou Bank Wealth Management reflects a shift in the growth momentum of the wealth management subsidiary. At end-June, the outstanding product scale of Hangzhou Bank Wealth Management was 608.76 billion yuan (approximately $90.6 billion), up only 0.19% from the beginning of the year and 18.35% year-on-year — a marked deceleration from the 38.53% year-on-year growth recorded for full-year 2025. Operating performance, however, showed some recovery: first-half operating revenue was 771 million yuan (approximately $114.7 million) and net profit was 501 million yuan (approximately $74.6 million), up 6.20% and 3.73% year-on-year respectively, turning from last year’s “double decline” to a “double increase.”

Distribution of third-party products expanded at a rapid pace. At end-June, the bank’s distribution business balance (excluding products distributed for Hangzhou Bank Wealth Management) was 117.84 billion yuan (approximately $17.5 billion), an increase of 40.47 billion yuan (approximately $6.0 billion) from the beginning of the year, or 52.29%.

In financial investments, the bank’s total financial investment portfolio at end-June was 1.09 trillion yuan, up 5.17% from the beginning of the year. Trading financial assets rose 22.38% from the start of the year, with increased allocations to fund investments and interbank certificates of deposit, which stood at 86.09 billion yuan (approximately $12.8 billion) and 24.32 billion yuan (approximately $3.6 billion) respectively at period-end, up 22.02% and 137.19% from the beginning of the year.

Interim dividend of 3.33 billion yuan; capital replenishment pressure persists

Under the 2026 interim profit distribution plan, Bank of Hangzhou intends to distribute a cash dividend of 4.60 yuan (pre-tax) per 10 ordinary shares to all ordinary shareholders, based on the total ordinary share capital on the record date for the equity distribution, amounting to a total cash dividend of 3.33 billion yuan (approximately $496.3 million).

The continued decline in capital adequacy levels warrants attention. In the first half of 2025, Bank of Hangzhou’s 15 billion yuan (approximately $2.2 billion) convertible bonds were converted into shares in a concentrated manner, effectively replenishing core Tier 1 capital. However, since the second half of 2025, against a backdrop of continued asset growth but declining profitability, the capital adequacy ratio and core Tier 1 capital adequacy ratio have re-entered a downward trajectory. As of end-June, the consolidated core Tier 1 capital adequacy ratio, Tier 1 capital adequacy ratio, and capital adequacy ratio were 9.52%, 11.51%, and 13.99% respectively, down 0.07, 0.25, and 0.38 percentage points from the beginning of the year.