China Zheshang Bank credit costs to stay elevated over next two years

Loans to the property sector and inclusive finance will remain problems.

China Zheshang Bank (CZB)’s credit costs are expected to remain elevated over the next 24 months despite its shift towards lower-risk segments and amidst ongoing efforts to address problem assets.

The bank’s credit costs are projected to fall between 1.3%-1.4% over the next two years, according to S&P Global Ratings. This is higher than the industry average of 0.6%-0.7%.

Loans to the property sector and inclusive finance will remain the main sources of asset quality pressure for CZB, the ratings agency said.

“Despite a notable reduction in these exposures, CZB still has higher concentration than its peers'. The bank's property loans constituted 9.5% and inclusive finance loans made up 18.9% of its total loans as of the end of June 2025,” S&P said in a ratings commentary published on 25 November 2025.

CZB is expected to continue curbing growth in high-risk segments such as property, micro and small enterprises (MSEs), and unsecured consumer lending. It is also expected to gradually increase its focus on large corporates and residential mortgage loans.

“In addition, ongoing efforts to resolve problem assets through write-offs and disposals should help keep the bank's non-performing asset (NPA) ratio broadly aligned with the industry average,” S&P said.

S&P projects CZB's NPA ratio to rise moderately to 5.4%-5.9% over the next two years, from 5.3% at end-2024, amid challenges posed by slowing economic growth in China. This is in line with the industry average of 5.4%-5.8%.

S&P’s NPA metric includes nonperforming loans, special-mention loans, and our estimates of other problem assets.