Earning 3.9 billion yuan less from its corporate banking segment while the retail banking business is still loss-making: Why has China Everbright Bank failed to achieve profit growth through its cost reduction efforts?

Recently, China Everbright Bank Fuzhou Branch launched a retail non-performing asset transfer project, with total principal, interest and related fees of about 741 million yuan, including principal of about 527 million yuan, covering 67,400 borrowers, with a weighted average overdue period of about 627 days. The project is expected to be auctioned in December and is currently in the investment promotion stage.

When this consumer loan asset package entered the transfer procedure, the retail business of Everbright was still making losses, and the corporate business also earned significantly less.

In the first half of this year, China Everbright Bank's net profit attributable to shareholders reached 18.711 billion yuan, down 24.01% year on year. Broken down by business segment, the group's pre-tax profit decreased by 6.468 billion yuan year on year, of which the corporate banking segment decreased by 3.917 billion yuan, accounting for about 60%; the retail segment decreased by 2.3 billion yuan year on year.

Interest expenses on deposits and management fees are both declining, but profits have not been stabilized. The decrease in income and the increase in credit impairment have offset these savings.

I. Corporate business earned 3.9 billion yuan less, mainly due to higher credit impairment

In the first half of the year, the pre-tax profit of the corporate banking segment was 11.285 billion yuan, compared with 15.202 billion yuan in the same period of the previous year, a decrease of 3.917 billion yuan. In the same period, credit impairment losses increased from 1.501 billion yuan to 5.593 billion yuan, an increase of 4.092 billion yuan.

Adding back the current credit impairment to the segment's pre-tax profit, calculated based on the disclosed data, the amount rose from 16.703 billion yuan to 16.878 billion yuan, an increase of 175 million yuan. The total of other income and expenses excluding impairment remained roughly at the level of the previous year.

This is partly due to the reduction of expenses. The operating income of corporate banking decreased by 252 million yuan year on year, while business and management fees decreased by 648 million yuan. Revenue decreased slightly, and more expenses were saved, but the increased credit impairment changed the final result.

For the whole year of 2025, the credit impairment loss of the corporate banking segment was 5.752 billion yuan. The 5.593 billion yuan in the first half of this year is already close to the full-year figure of last year. The low base of 1.501 billion yuan in the first half of last year also amplified the year-on-year increase this year.

The increase in loan size did not bring more loan interest income. The average daily balance of corporate loans increased by 65.777 billion yuan year on year, growing by about 2.7%; the average yield dropped from 3.41% to 2.98%, and loan interest income decreased by 4.195 billion yuan instead.

At the end of June, the balance of non-performing corporate loans increased by 7.582 billion yuan net compared with the beginning of the year, accounting for about 96% of the total net increase in non-performing loans. The three industries of real estate, leasing and business services, wholesale and retail together account for more than 70% of the net increase in corporate non-performing loans.

Expenses have been reduced, but the pressure of declining loan yields and rising credit costs remains. Although the corporate business continues to make profits, its contribution to the group's profits has decreased significantly.

II. Retail revenue decreased, and impairment increased by another 1.445 billion yuan

For the whole year of 2025, the pre-tax loss of China Everbright Bank's retail segment was 2.86 billion yuan. In the first half of this year, it continued to lose 1.379 billion yuan; compared with the profit of 921 million yuan in the same period of last year, the pre-tax profit decreased by 2.3 billion yuan.

Similarly, adding back the current credit impairment, calculated based on the segment data, the amount decreased from 15.858 billion yuan to 15.003 billion yuan, a decrease of 855 million yuan. The credit impairment loss increased by another 1.445 billion yuan, and the two items exactly correspond to the 2.3 billion yuan decrease in pre-tax profit.

The income and expenditure excluding corporate impairment have remained basically stable, but even this part of the retail business is declining.

The loan contraction involves multiple varieties. In the first half of the year, the balance of housing mortgage loans decreased by 16.206 billion yuan compared with the beginning of the year, personal operating loans decreased by 17.281 billion yuan, consumer loans decreased by 2.529 billion yuan, and credit card loans decreased by 14.874 billion yuan, with the four categories totaling a decrease of 50.89 billion yuan.

Mortgage loans and personal operating loans account for about two-thirds of the reduction, and credit cards are only part of it.

The average yield of retail loans also dropped from 4.39% to 4.18%, and loan interest income decreased by 2.494 billion yuan year on year. The interest expense on retail deposits decreased by 1.665 billion yuan, which still failed to make up for the reduced interest income.

The wealth business also failed to bring more handling fees. At the end of June last year, the total assets under management of retail customers of China Everbright Bank was about 3.1 trillion yuan, which increased to 3.29 trillion yuan at the end of June this year; however, the net income from personal wealth management handling fees decreased from 3.757 billion yuan to 3.598 billion yuan.

Retail operating income decreased by 1.271 billion yuan year on year, and business and management fees decreased by 424 million yuan. The reduction of expenses failed to offset the decline in income.

As loans decrease, the expected loss of existing loans still needs to be assessed. The semi-annual report only discloses the total credit impairment of the retail segment, and does not list the respective impairment amounts of mortgages, operating loans, consumer loans and credit cards.

The balance of the four types of loans decreased by 50.89 billion yuan compared with the beginning of the year, and the credit impairment loss of the retail segment increased by 1.445 billion yuan year on year. With income decreasing and impairment expenses increasing, the retail business has not yet got out of losses.

III. Paid 10.155 billion yuan less in interest, still failing to fill the income gap

Everbright's net interest income increased by 3.17% in the first half of the year, relying on the larger decline in interest expenses.

Interest income on the asset side decreased by 8.716 billion yuan year on year, and interest expenses on the liability side decreased by 10.155 billion yuan. After offsetting the two, net interest income increased by 1.439 billion yuan.

Among them, interest expenses on deposits decreased by 7.301 billion yuan. The average daily balance of deposits increased slightly, while the average cost rate dropped from 1.92% to 1.55%. The effect of deposit cost reduction has been reflected in the statements.

However, non-interest income decreased by 4.289 billion yuan. Among them, net fee and commission income decreased by 767 million yuan, and other income decreased by 3.522 billion yuan. The increment of net interest income failed to fill the gap, and the total operating income finally decreased by 2.85 billion yuan year on year.

Investment income decreased by 7.764 billion yuan, while the gain or loss from fair value change improved by 5.047 billion yuan. The two items decreased by 2.717 billion yuan in total. Coupled with the change in exchange gain or loss, the three items decreased by 3.704 billion yuan in total.

After the total revenue declined, credit impairment losses increased by 4.977 billion yuan year on year. The 1.136 billion yuan saved in management fees can only offset part of the impact.

The details of loan impairment also show that the group's net provision for amortized cost loans increased by 6.509 billion yuan year on year, of which the net provision for stage 3 loans with incurred credit impairment increased by 5.07 billion yuan, accounting for nearly 80% of the increment. Loans that have incurred credit impairment are still the main source of additional provisions in this period.

The lower profit from corporate business is mainly affected by the increase in credit impairment; the retail business even sees a decline in pre-tax profit after adding back credit impairment. Disposing non-performing assets helps to reduce the risk burden, and the problem of declining income still needs to be solved by the business itself. The reduction of deposit interest rates has helped, but relying only on cost reduction, Everbright's profits have not yet stabilized.