Fined 8.7 million yuan, senior executives banned from the industry, is Chongqing Rural Commercial Bank’s status at risk?

Lyu Zihe, The Investor

By the end of 2025, the administrative penalty information disclosed by the Chongqing Regulatory Bureau of the National Financial Supervisory AuthorityChongqing Rural Commercial Bank (hereinafter referred to as 'Chongqing Nongshang Bank', 601077.SH/3618.HK) was fined 8.7 million yuan for five illegal activities including inadequate 'three checks' on loans and insufficient accountability for significant risk losses.Shu Jing, the then vice president, and Feng Hongwei, the Chief Credit Officer, were permanently banned from the industry, with 10 other senior executives also penalized.

As the first rural commercial bank in the country to have an asset scale exceeding one trillion yuan and a leading financial institution native to the Chengdu-Chongqing economic circle, every move by Chongqing Rural Commercial Bank draws considerable market attention. This record-breaking fine not only exposed significant gaps in its compliance management but also reflected the deep conflicts faced by top-tier rural commercial banks in balancing rapid expansion and strict risk control.

Amid increasingly stringent banking regulations and intensifying market competition, what is the true state of this trillion-yuan financial institution's fundamentals? How should it navigate through the shadow of compliance challenges?

Non-performing loan balance surpasses 10 billion yuan

Among the five violations by Chongqing Rural Commercial Bank reported in this regulatory notice, the failure to diligently conduct loan 'three checks' is considered the core issue, and its impact has already shown up in the business data.

Looking at the specific violations, Chongqing Rural Commercial Bank has systemic loopholes throughout the entire loan process in key areas such as personal business loans and guaranteed loans. These include perfunctory pre-loan investigations, lax mid-loan review standards, and a lack of post-loan tracking management. More seriously, for large non-performing loans overdue for more than one year or three years, the bank failed to promptly activate risk warning mechanisms, and accountability measures were not effectively implemented, leading to a continuously expanding risk exposure. The absence of oversight on senior management’s performance allowed these violations to spread across departments and regions, ultimately resulting in severe regulatory penalties.

In fact, signs of Chongqing Rural Commercial Bank's risk隐患 have already emerged at the data level.

From 2021 to June 2025, the scale of overdue loans at Chongqing Rural Commercial Bank soared from 6.892 billion yuan to 10.767 billion yuan, an increase of 56.2%.，This far exceeds the growth rate of total loans during the same period. Notably, the risks associated with unsecured loans have risen particularly sharply, with their proportion increasing from 16.91% in 2021 to 24.07% by June 2025. Overdue unsecured loans grew from 871 million yuan to 2.125 billion yuan, a 144% increase over two years, directly related to the failure of the credit 'three checks' mechanism.

The fine of 8.7 million yuan not only cost the bank dearly in monetary terms but also impacted its brand reputation and the stability of its senior management team. The prohibition and reassignment of core managerial talents could affect the continuity of critical processes such as credit approval and risk control.

Where are the weak points?

Aside from compliance issues, Chongqing Rural Commercial Bank's fundamental business operations still demonstrate the strong foundation of a regional leader, but the tension between scale expansion and profit growth is becoming increasingly apparent.

In terms of scale, the bank’s regional advantages continue to strengthen. By the end of September 2025, Chongqing Rural Commercial Bank’s total assets reached 1.65581 trillion yuan, growing by 30.8% compared to the end of 2021; deposits absorbed amounted to 1.027092 trillion yuan, successfully breaking through the trillion-yuan mark, demonstrating strong regional capital aggregation capabilities.

Credit deployment has also increased significantly. By September 2025, the total loan amount was 777.973 billion yuan, up 33.6% from 2021, with corporate loans accounting for 53.82%, mainly focusing on regional pillar industries such as manufacturing and infrastructure. The balance of manufacturing loans ranks first among all financial institutions in the city.

Chongqing Rural Commercial Bank’s profitability performance reflects the characteristics of being 'stable but lacking growth'.

In the first three quarters of 2025, Chongqing Rural Commercial Bank achieved operating revenue of 21.658 billion yuan, a year-on-year increase of only 0.67%; net profit attributable to shareholders reached 10.694 billion yuan, up 3.74% year-on-year. Although the net profit maintained positive growth, its growth rate narrowed significantly compared to 13.79% in 2021, and revenue growth was nearly stagnant.

The resilience of profit growth mainly came from scale expansion and optimization of provision charges; by the end of September 2025, the bank’s provision coverage ratio reached 364.82%, an increase of 24.57 percentage points from 2021, placing its risk mitigation capability at a leading level in the industry.

However, at the same time, hidden concerns about its profit structure cannot be ignored. The bank's revenue still heavily relies on net interest income, with the proportion of net interest income reaching as high as 82.42% in the first three quarters of 2025, while non-interest income remained under pressure. Among this, net fee and commission income was 1.057 billion yuan, down 16.68% year-on-year, mainly dragged down by declines in bank card fees.

In terms of cost control, the bank has continued to push for cost reduction and efficiency improvements. The cost-to-income ratio in the first three quarters of 2025 was 27.20%, significantly lower than 33.94% in 2023, but credit impairment losses still amounted to 3.229 billion yuan, indicating that risk mitigation pressures have not been fully alleviated.

Moreover, although overall asset quality remains manageable, certain areas are under pressure. As of September 2025, the bank’s non-performing loan ratio was 1.12%, steadily declining from 1.25% in 2021 and better than the industry average. However, risks in key sectors remain prominent: the non-performing loan ratio in the real estate sector reached 9.27% in 2023, and the ratio in the wholesale and retail sectors remained at a relatively high level, making them key targets for asset quality management.

Can it seize regional opportunities?

Facing multiple challenges such as compliance risks, profitability bottlenecks, and capital pressure, Chongqing Rural Commercial Bank’s path forward presents both opportunities and significant obstacles.

At present, the core challenges faced by the bank are concentrated in three aspects.

First, the pressure for capital replenishment is becoming evident. By September 2025, the Common Equity Tier 1 Capital Adequacy Ratio was 12.98%, a decrease of 1.26 percentage points from the end of 2024. While it still exceeds regulatory requirements, the ongoing downward trend may constrain future credit expansion capacity.

Second, the ongoing impact of interest rate liberalization has narrowed the net interest margin from 2.17% in 2021 to 1.59% by September 2025, weakening the intrinsic growth momentum of interest income.

Third, regional competition has intensified, with state-owned banks penetrating county-level markets, joint-stock banks pushing inclusive finance, and local city commercial banks engaging in close competition, leading to fierce battles over deposit acquisition and loan pricing that squeeze profitability.

However, the strategic dividends of regional development also provide transformation opportunities for Chongqing Rural Commercial Bank.

The deepening advancement of the Chengdu-Chongqing Economic Circle construction has brought stable credit demand from manufacturing upgrades, infrastructure projects, and rural revitalization. By June 2025, the bank’s manufacturing loans reached 80.992 billion yuan, growing 29.7% over five years, while its green credit balance hit 73.219 billion yuan, aligning well with policy directions.

The inclusive finance sector holds significant potential, with the bank's personal business loan balance at 123.847 billion yuan, accounting for 41.22% of total personal loans, covering 200,000 small and micro enterprises. The bank possesses natural advantages in serving agriculture and rural economies.

In the future, Chongqing Rural Commercial Bank needs to break through in four areas. First, strengthen internal controls, reconstruct the 'three checks' process for credit, establish a lifelong accountability system for large loans, and reinforce compliance defenses; second, optimize business structure, reduce reliance on interest income, and focus on intermediary services and green/science-tech finance; third, diversify capital replenishment to stabilize the capital adequacy ratio supporting credit expansion; fourth, enhance digital risk control using financial technology to improve risk warning efficiency and achieve a balance between scale and risk.

As a benchmark enterprise in the rural commercial banking industry, Chongqing Rural Commercial Bank’s transformation path is highly representative. Under the backdrop of stricter regulation and market changes, only by adhering to compliance baselines, focusing on core strengths, and continuously deepening transformation can it strike a balance between scale expansion and high-quality development, truly achieving long-term stability. For this trillion-yuan-level rural commercial bank, the recent fine of 8.7 million yuan serves as both a warning and an opportunity to improve governance and move toward maturity. (Produced by Thinking Finance) ■

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