CZBANK stays stable but property risks spark new NPL threat

Net interest margin narrowed in 9M 2025, but this is expected to slow, Moody’s said.

China Zheshang Bank (CZBANK) is expected to maintain stable asset quality and capitalisation over the next 12-18 months, although profitability will remain weak.

Its annualized return on average assets (ROAA) was 0.48% in the first nine months of 2025, down from 0.55% a year earlier, according to a report by Moody’s Ratings in January 2026.

CZBANK’s asset quality is expected to remain stable through mid-2027 thanks to its focus on economically advanced regions and reduced exposures to the property sector over the last two years, Moody’s said.

But bad loans remain a risk that could weigh on the bank’s asset quality.

“The formation of new nonperforming loans (NPLs) remains a risk to CZBANK's asset quality because of unseasoned risks in financing domestic economic transition and high asset risks from the property sector,” the ratings agency wrote.

Its net interest margin (NIM) also narrowed by 13 basis points (bps) to 1.67% during the same nine month period, blamed on a greater reduction in asset yield than in liability cost.

This NIM narrowing is likely to slow through 2027, however, as declining deposit rates keep total liability costs low. But credit costs on loans are likely to stay higher because of new non-performing loan (NPL) formation, Moody’s said.

CZBank is based in Hangzhou, China.