Bank of Nanjing 1Q26 revenue beat expectations, net profit growth in line with expectations

Overview

This report is UBS's review of Bank of Nanjing's full-year 2025 and 1Q26 results. In 2025, Bank of Nanjing's revenue grew 1.5% YoY and attributable net profit grew 8.1% YoY; in 1Q26, revenue rose 13.5% YoY to Rmb16.1bn, while net profit increased 8.0% YoY to Rmb6.6bn. UBS believes the stronger-than-expected 1Q26 revenue performance was mainly driven by significant growth in net interest income, while net profit growth was broadly in line with expectations.

Core views

The core view is that Bank of Nanjing's 1Q26 top-line performance was stronger than expected, with net interest income up 39.4% YoY, partly offsetting declines in fee income and other non-interest income. UBS estimates NIM at 1.62%, up 11bp QoQ, likely mainly driven by lower funding costs. Asset quality remained broadly stable, with the NPL ratio at 0.83%, the special mention loan ratio down to 1.05%, and the provision coverage ratio at 306.8%. On capital, the CET1 ratio was 9.17%, down 18bp QoQ and up 28bp YoY. UBS expects investors to react positively to the strong net interest income and revenue growth.

Analysis framework

The report uses earnings decomposition, comparison of key financial indicators, and valuation comparison, focusing on revenue, net interest income, pre-provision profit, net profit, net interest margin, asset quality, capital adequacy, loan growth, and deposit growth, and compares Bank of Nanjing's 0.74x 2026e P/B with the peer average of 0.66x.

Methodology notes

• Valuation methodp/bv versus roe

  P/B and ROE valuation

  UBS states that its target price is derived from a P/B and ROE valuation approach, which assesses fair valuation by combining the bank's book value, profitability, and return on capital.

• Earnings quality analysisp&l decomposition

  Profit and loss decomposition

  The report breaks down revenue growth into net interest income, fee and commission income, and other non-interest income, and further examines the transmission to pre-provision profit, credit costs, and net profit.

• Bank operating indicatorsasset quality and capital ratios

  Asset quality and capital indicators

  The report uses the NPL ratio, special mention loan ratio, overdue loan ratio, provision coverage ratio, credit costs, CET1 ratio, tier-1 capital adequacy ratio, and total capital adequacy ratio to assess the bank's risk profile and capital buffer.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• 601009.SS

  Covered stock; Bank of Nanjing A-share

  Strengths

  Strong net interest income growth, 1Q26 revenue beat expectations, net profit growth in line with expectations, stable asset quality indicators, and provision coverage ratio still at a high level.

  Weaknesses

  Fee income and other non-interest income declined YoY, the CET1 ratio fell QoQ, and credit costs rose YoY.

  Comparison

  The report states that Bank of Nanjing's previous closing price corresponds to 0.74x 2026e p/b, above the peer average of 0.66x.

  Risks

  Deterioration in asset quality, further LPR cuts pressuring bank profitability, a rising cost-to-income ratio dragging on profits, and potential mark-to-market losses on bond assets.

Key data

• 1Q26 revenueRmb16.1bn, up 13.5% YoYGrowth accelerated versus 2025 and was better than UBS expectations.
• 1Q26 net profitRmb6.6bn, up 8.0% YoYSimilar to the 2025 growth rate and broadly in line with UBS expectations.
• Net interest incomeup 39.4% YoYThe main driver of revenue growth.
• Fee income and other non-interest incomedown 14.6% and 18.8% YoY, respectivelyPartly offset net interest income growth.
• Net interest margin1.62%UBS estimate; up 11bp QoQ and down 29bp YoY; the sequential improvement may have come from lower funding costs.
• NPL ratio0.83%As of end-1Q26, flat QoQ and YoY.
• Special mention loan ratio1.05%Down 11bp QoQ and down 10bp YoY.
• Provision coverage ratio306.8%Down 6.8 percentage points QoQ and down 16.9 percentage points YoY, but still maintained at a high level.
• CET1 ratio9.17%As of end-1Q26, down 18bp QoQ and up 28bp YoY.
• Loan growthTotal loans in 1Q26 grew 7.7% QoQ, increasing by Rmb110.3bnHigher than the Rmb89.7bn increase in 1Q25, indicating strong credit extension at the start of the year.
• Full-year 2025 dividendRmb0.529 per shareIncluding Rmb0.306 per share for the first half and a final dividend of Rmb0.223 per share, implying a dividend yield of about 4.6% based on the last closing price.
• Valuation0.74x 2026e p/bHigher than the peer average of 0.66x.

Impact & implications

The report suggests a positive short-term share price reaction for Bank of Nanjing, mainly because net interest income and revenue growth were stronger than expected, while net profit growth met expectations and asset quality remained stable. Strong loan growth and lower funding costs supported the top line, but the sequential decline in capital ratios, the YoY increase in credit costs, and pressure on non-interest income still warrant monitoring.

Risks

• A rise in retail loan delinquencies leading to deterioration in asset quality.
• More LPR cuts in the medium term may pressure bank profitability.
• A higher cost-to-income ratio may weigh on bottom-line profit growth.
• Bond assets may incur potential mark-to-market losses.
• The sequential decline in capital ratios needs continued monitoring.

What to watch

• Whether net interest margin can continue to improve sequentially.
• The sustainability of lower funding costs in supporting net interest income.
• Asset quality and NPL formation following strong loan growth.
• Changes in the special mention loan ratio, overdue loan ratio, and provision coverage ratio.
• Changes in the CET1 ratio, tier-1 capital adequacy ratio, and total capital adequacy ratio.
• Whether fee income and other non-interest income can stabilize.
• Dividend sustainability and dividend yield performance.