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Nanyang Commercial Bank Issuer Flash: FY2025 Results

Nanyang Commercial Bank Issuer Flash: FY2025 Results

Report date: 2026-05-22 Event date: 2026-03-19 Event title: FY2025 Results

Flash Conclusion

Nanyang Commercial Bank's FY2025 results do not materially weaken the credit view. Rather, they confirm that the deterioration in asset quality seen in 2024 has, for now, stabilised. Deposits, liquidity, and regulatory capital remain robust, preserving the core support for the issuer credit profile of the senior debt. At the same time, profit after tax was broadly flat, ROE remained in the 4% range, and provisioning related to Mainland China property risk continued to weigh on earnings. The results therefore represent confirmation of improvement, but not a resolution of risk.

There is no change to the view in the latest issuer_summary: NCB should be viewed as a Hong Kong bank supported by a strong deposit base, liquidity, and capital, while Mainland China property exposure, Hong Kong property exposure, the distinction between parental support expectations and explicit guarantees, and ranking differences for subordinated and capital securities should continue to be monitored. The senior debt remains monitorable on a continuing basis, but capital securities that may be equivalent to Tier 2 or AT1 instruments require review of their specific terms in addition to the issuer credit profile.

What Was Announced

NCB's 2025 annual financial statements were approved by the board of directors and authorised for issue on 2026-03-19. Key figures were total assets of HK$566.5bn, customer deposits of HK$405.7bn, gross advances to customers of HK$272.8bn, net interest income of HK$8.34bn, net operating income before impairment allowances of HK$10.97bn, net charge of impairment allowances of HK$2.81bn, and profit after tax of HK$3.50bn.

Capital and liquidity remain strong. At end-2025, the CET1 ratio was 15.99%, the Tier 1 ratio was 18.09%, the total capital ratio was 21.35%, and the leverage ratio was 10.66%. On liquidity, the average LCR in 4Q2025 was 188.43%, and the period-end NSFR was 143.70%. These levels are a clear support for the issuer credit profile.

Asset quality improved. Classified or impaired advances decreased from HK$7.56bn at end-2024 to HK$6.32bn at end-2025, and the classified or impaired advances ratio declined from 2.82% to 2.32%. Stage 3 allowances decreased from HK$3.06bn to HK$2.74bn. The decline in classified or impaired advances outside Hong Kong contributed to the overall improvement.

At the same time, the annual report explains that the Mainland China business faced significant pressure on profitability from narrowing interest spreads, intensified competition, volatility in non-interest income, and higher allowances related to Mainland China property risk. In other words, problem assets have declined, but property-related credit costs are still weighing on earnings.

Metric 2024 2025 Interpretation
Total assets HK$541.1bn HK$566.5bn Balance sheet resumed expansion
Customer deposits HK$394.4bn HK$405.7bn Deposit base maintained and expanded
Gross advances to customers HK$268.5bn HK$272.8bn Loan growth remained modest
Net interest income HK$8.09bn HK$8.34bn Slight increase
Net charge of impairment allowances HK$2.95bn HK$2.81bn Declined, but remains heavy relative to earnings
Profit after tax HK$3.48bn HK$3.50bn Broadly flat
Classified or impaired advances ratio 2.82% 2.32% Improved from the 2024 deterioration
Stage 3 allowances / classified or impaired advances Approx. 40.4% Approx. 43.4% Allowance coverage improved
Net charge of impairment allowances / average gross advances to customers Approx. 1.04% Approx. 1.04% Credit cost burden remains heavy
CET1 ratio 14.55% 15.99% Capital headroom improved
4Q average LCR 212.98% 188.43% Declined but remained high
4Q period-end NSFR 143.66% 143.70% Stable funding remained strong

Credit Read-Through

The most important point in the results is that asset quality improved, but earnings power did not strengthen. The return of the classified or impaired advances ratio to 2.32% is positive, but the ratio was also 2.32% at end-2023. FY2025 is therefore closer to a recovery from the 2024 deterioration than to the beginning of a broader normalisation trend. Stage 3 allowances amounted to approximately 43% of classified or impaired advances, improving from approximately 40% in 2024, but part of the credit outcome remains dependent on collateral values and recovery prospects.

For senior debt, the strength of deposits, liquidity, and capital remains the central support. Customer deposits substantially exceed loans, and the loan-to-deposit ratio is around 67% on a calculated basis. The CET1 ratio, total capital ratio, LCR, and NSFR are all sufficiently high, and the results alone do not suggest increased concern over short-term liquidity. For refinancing capacity at the individual bond level, maturities, currencies, market access, and issuance terms need to be checked.

However, the weight of credit costs should not be overlooked. The net charge of impairment allowances of HK$2.81bn in 2025 remains large relative to profit after tax of HK$3.50bn. The company’s explanation that Mainland China property risk is weighing on earnings also remains in place. If there is further deterioration in Hong Kong property or Mainland China property exposures, the limited depth of earnings means that higher credit costs could halt the improvement in capital.

The results also do not change the view on parental support expectations. The 2025 annual report explains that Huijin has become the controlling shareholder of China Cinda, and the ownership and support-expectation route through China Cinda / Cinda Financial Holdings / Huijin is a relevant credit reference point. However, this does not confirm an explicit government guarantee for NCB's liabilities or a guarantee agreement for any specific bond. Parental support expectations are a supporting factor for issuer credit, but they do not justify treating senior debt, Tier 2 instruments, and capital securities that may be equivalent to AT1 as carrying the same risk.

What To Watch Next

The next items to monitor are the 2026 first-quarter and interim regulatory disclosures. It will be necessary to check whether the classified or impaired advances ratio rises again from 2.32%, whether the improvement in advances outside Hong Kong continues, and whether problem loans in advances for use in Hong Kong increase. In particular, it is important to determine whether provisions related to Mainland China property continue to weigh on earnings or begin to decline.

On liquidity, customer deposits, funding from banks and financial institutions, LCR, and NSFR should be monitored. In 2025, deposits and balances from banks and financial institutions increased, so the stickiness of funding sources and the composition of foreign-currency liquidity are also items for future review. Given the large scale of financial investments, the quality of securities holdings, interest-rate risk, and liquidity treatment should be examined in greater depth in subsequent reviews.

Ratings and bond terms also remain unverified items. Official rating materials from Moody's, Fitch, and S&P need to be obtained to confirm standalone credit strength, parental support, government support, and downgrade triggers. For investment in individual bonds, the issuer, existence or absence of guarantees, subordination, call terms, loss-absorption provisions, and coupon-cancellation conditions must be checked.

Sources

Unverified / Pending