Shenzhen Rural Commercial Bank’s returns to decline slightly through 2026

Net interest margin and loan pressures will weigh on the bank’s asset quality.

Shenzhen Rural Commercial Bank (SZRCB) is expected to maintain steady asset quality, capitalisation, profitability, and liquidity over the next 12-18 months, according to Moody’s Ratings.

However, asset quality will be challenged, and profitability may decline slightly as lending risks rear their ugly heads.

However, asset quality will be challenged by risks from its rapid loan growth during 2017-2018. Loan growth has since slowed to around 9% in 2023 and 2024.

SZRCB’s non-performing loan (NPL) ratio rose to 1.11% in end-2024 from 0.99% in end-2023 and 0.9% in end-2022.

Loans to micro and small enterprises accounted for 22% of its gross loans, and the NPL ratio is 1.3%.

The bank will also be challenged by high exposure to property developers.

“We expect the bank's profitability, measured by return on average assets (ROAA), to decline slightly over the next 12-18 months, largely because of the pressure on net interest margin (NIM),” Moody’s said.

The bank has a strong deposit base due to its last branch network in Shenzhen. It is also expected to maintain ample liquid resources to cover its market funds, the ratings agency said.