Shanxi Bank of China limited (Shanxi Bank) reported a net profit of 51 million yuan in 2024, a 93.86% decrease compared to the same period in 2023, when it was 8.31 billion yuan. At the same time, the bank’s asset profitability ratio decreased, the provision coverage ratio slipped, and the non-performing loan ratio increased.
According to a report from “Huaxia Times” on March 1, Shanxi Bank’s interbank certificate of deposit issuance plan for 2025 revealed that its operating income in 2024 increased slightly by 0.44% compared to 2023. However, the net profit decreased by 93.87% to 51 million yuan, falling below the 2022 level. In terms of asset quality, the non-performing loan ratio rose by 0.76 percentage points to 2.50% compared to 2023, also surpassing the 2022 level. The asset profitability ratio shrunk, and the provision coverage ratio decreased by nearly 50 percentage points. Although the relevant data has not been audited yet, the decline in performance has become a reality.
As for the significant decline in Shanxi Bank’s performance in 2024, the bank explained on February 28 that during 2024, it merged four high-risk village banks while continuing to reduce fees, enhance risk resilience, affecting indicators such as net profit, non-performing loan ratio, and provision coverage ratio. The banking industry as a whole faced significant operational pressures in 2024.
In September 2024, approved by the China Banking and Insurance Regulatory Commission, Shanxi Bank acquired four village banks: Huimin Village Bank of Yangqu County, Taihang Village Bank of Shan Yin County, Yuci Rongxin Village Bank of Jinzhong City, and Huimin Village Bank of Wanrong County. It took over the assets, liabilities, business, and employees of these banks and converted them into branches.
Yuan Shuai, Deputy Secretary-General of the Zhongguancun Internet of Things Industry Alliance, believes that the absorption of merged village banks may be one of the reasons for the changes in Shanxi Bank’s bank profit, non-performing loan ratio, provision coverage ratio, and other indicators by the end of 2024. If the quality of the merged village banks’ assets is poor and they have more non-performing loans, the bank’s non-performing loan ratio will rise directly. Additionally, due to the need for the bank to bear the disposal costs of these non-performing loans, it may have a negative impact on the bank’s profit in the short term. Furthermore, as non-performing loans increase, the bank may need to make more provisions for loan losses, leading to a decrease in the provision coverage ratio.
Analysts also point out that as a result of the merger, there is a certain capital consumption due to the assumption of the absorbed bank’s non-performing assets, such as high-risk loans.
Public data shows that Shanxi Bank of China limited was established as a provincial-level legal person city commercial bank through the establishment of Datong Bank, Changzhi Bank, Jincheng Bank, Jinzhong Bank, and Yangquan City Commercial Bank by way of a new establishment merger, with a registered capital of 25.894 billion yuan. On April 28, 2021, Shanxi Bank of China limited held a grand opening ceremony in Taiyuan.