Yunnan Rural Commercial Bank, Yin and Yang in harmony

Ask AI · How do debt securities help banks balance expansion and risk?

Produced by | Financial and Cultural Society

Article | Jia Ru

Edited by | He Bi

If we had to describe Chongqing Rural Commercial Bank (Chongqing Rural Commercial Bank) with one word for its 2025 financial results, it would definitely be “remarkable.”

According to its 2025 financial report data, over the reporting period, the bank’s total assets exceeded 1.66 trillion yuan, up 9.95%, with the growth rate reaching the highest level in nearly four years; it achieved net profit of 12.420 billion yuan, up 5.35%; and the non-performing loan ratio further fell to 1.08%, while the provision coverage ratio remained at a solid level of 367.26%.

In addition, whether in areas such as assets, deposits, and lending volumes that have continued to rank first among peers in Chongqing, or in precise efforts and market leadership in fields including technology finance, green finance, and inclusive finance, all of this confirms the successful conclusion of its “14th Five-Year Plan” and the strengthening of its competitive barriers.

The balancing challenge between expansion and capital

However, amid this overall excellent scorecard, one data change is worth a deeper interpretation: by the end of 2025, Chongqing Rural Commercial Bank’s net capital was 1,495.889 billion yuan, up 4.52% from the end of the prior year; in the same period, total risk-weighted assets reached 1,034.811 billion yuan, up 16.53% from the end of the prior year.

With the growth rate of net capital significantly lower than that of risk-weighted assets, this “spread” directly led to a decline in capital adequacy ratios at all levels. The core tier-one capital adequacy ratio, tier-one capital adequacy ratio, and capital adequacy ratio were 12.67%, 13.27%, and 14.46%, respectively, down 1.57, 1.66, and 1.66 percentage points from the end of the prior year.

Although all indicators remain significantly higher than regulatory requirements, the change in trend reveals an internal balance challenge facing Chongqing banks during rapid development: the fast expansion of business—especially the strong deployment of credit assets—is accelerating the consumption of capital.

Active liability management supports expansion

In response to this challenge, Chongqing Rural Commercial Bank’s strategy is clearly reflected in changes in its liabilities structure. By the end of 2025, the group’s outstanding balance of debt securities was 188.485 billion yuan, up 16.828 billion yuan from the end of the prior year, an increase of 9.80%.

Correspondingly, for the full year 2025, the group’s interest expense on issued debt securities was 3.379 billion yuan, up 0.171 billion yuan year over year, an increase of 5.32%.

This set of data allows us an excellent perspective to observe how banks actively manage the dynamic balance of “quantity, pricing, and risk.”

As is well known, issuing debt securities is an important way for banks to actively integrate funding from the market and to supplement their sources of liabilities. While customers’ deposits—a core liability—grow naturally, the bank also increases the issuance of debt securities, reflecting a clear demand from management to support asset expansion, optimize the liabilities structure, and manage liquidity.

Actively issuing debt securities can diversify the sources of liabilities and make the maturity arrangement more predictable, thereby enhancing a bank’s resilience in responding to changes in market liquidity.

So, does the resulting increase in interest expense constitute an unbearable burden? The data show that in 2025, Chongqing Rural Commercial Bank’s total interest expense was 22.205 billion yuan, down 2.389 billion yuan year over year, a decrease of 9.71%. Against the backdrop of a significant decline in overall interest expense, although interest expense on debt securities increased by an absolute 0.171 billion yuan, its share in total interest expense and its growth rate are relatively controllable.

More importantly, the funds raised through issuing these debt securities supported the faster expansion of interest-earning asset size. The data show that in 2025, Chongqing Rural Commercial Bank’s net interest income reached 24.261 billion yuan, up 1.766 billion yuan year over year, an increase of 7.85%. The increase in net interest income was far higher than the increase in interest expense on debt securities.

This means that the marginal cost of its debt financing is effectively covered by the higher returns created on the asset side, ultimately making a positive contribution to growth in net profit. This kind of operation—raising funds at a reasonable cost to support the deployment of higher-yielding assets—is precisely the core of bank asset-liability management. Since debt securities are part of active liabilities, the good control of their cost is crucial to this.

Looking further, Chongqing Rural Commercial Bank’s debt financing activities are not isolated decisions, but are embedded in its overall development strategy and risk management framework.

Issuing debt securities is an important “external capital supplementation” supporting measure adopted when the pace of “internal capital accumulation” temporarily cannot keep up with business expansion. It differs from equity financing; it does not dilute existing shareholders’ equity, and is a viable option for continuing to support the real economy under capital constraints.

At the same time, all forms of active liabilities management are carried out within a strict liquidity risk management framework. By the end of the reporting period, the group’s liquidity coverage ratio was as high as 461.82%, the net stable funding ratio was 130.88%, and the liquidity ratio was 92.98%—all far exceeding regulatory requirements. This indicates that its debt financing is prudent and backed by sufficient safety buffers, not blind leverage.

From a more macro perspective, the “high-growth in business—rapid capital consumption—active liabilities supplement” feature demonstrated by Chongqing Rural Commercial Bank in 2025 is precisely a true financial reflection of its firm efforts to advance “high-quality development” and “deeply build three new drivers” strategies.

The financial report shows that the company’s loans grew significantly by 21.46%. Loans to manufacturing industries, technology-based enterprises, green loans, and others all recorded notable growth while maintaining leading positions in the market.

Therefore, in the current stage, the mild decline in capital adequacy ratios alongside the increase in active liabilities can, to a certain extent, be interpreted as the necessary financial cost paid by the bank when taking on greater social responsibility and seizing regional development opportunities. It is a quantitative expression of the “political nature and people-centered character” of financial work.

Transformation enables long-term progress

Chongqing Rural Commercial Bank’s 2025 annual report presents a complex picture of “enterprise and prudence intertwined, opportunities and challenges coexisting.” Its outstanding progress on the track of high-quality development is evident to all, but the rapid capital consumption brought about by business expansion is also an indisputable fact.

The growth in issued debt securities and the increase in related interest expenses are precisely the bank’s proactive and rational strategies under the asset-liability management framework to address this situation. This strategy was effective in supporting business development and serving the real-economy strategy during the period, with costs and risks both under control.

However, this is not a long-term solution. The bank’s continued steady and sound development in the future ultimately depends on whether it can successfully promote strategic transformation—truly shifting from “growth driven by scale” to “equal emphasis on quantity, pricing, and risk,” and from “product thinking” to “ecosystem operations,” so as to achieve breakthroughs in improving capital utilization efficiency and operating effectiveness.

Only in this way can it, while serving the grand journey of building a modern new Chongqing, both demonstrate the commitment of a mainstay of local finance and create long-term, stable, and sustainable value returns for shareholders—steady progress and long-term success.