Bank of Lanzhou's H1 Core Net Profit Up 7.14%, Deposit Cost Rate Down 19 Bps

Bank of Lanzhou (001227.SZ) released its semi-annual report for 2026, posting operating income of RMB 4.179 billion, a year-on-year increase of 6.6%. Net profit attributable to shareholders, excluding non-recurring gains and losses, reached RMB 960 million, up 7.14% year-on-year. In terms of credit allocation, the bank has anchored its strategy to Gansu Province's local endowment in wind and solar new energy resources.

Core Business Profitability Shows Resilience

In the first half of 2026, Bank of Lanzhou achieved:

• Operating income: RMB 4.179 billion (+6.6% YoY)
• Net profit (excl. non-recurring items): RMB 960 million (+7.14% YoY)

After stripping out non-recurring items, the bank's core lending business maintained an upward trend in real profitability. This sustained recurring profit has strengthened the bank's endogenous cash-generation capacity from its deposit and loan operations. Stable core earnings, converted into retained profits, provide a source for internal capital replenishment while reducing reliance on non-recurring income such as investment valuation fluctuations and asset disposals, thereby enhancing resilience against external market shocks.

Liability Structure Improvement Offsets Margin Pressure

The liability side showed structural improvements, serving as the bank's key lever to hedge against industry-wide net interest margin (NIM) pressure and stabilize its profit base. During the reporting period, amid a challenging NIM environment, the bank avoided a "price war" and instead deepened its focus on corporate and retail core customer groups within Gansu Province. By implementing精细化 deposit pricing to lower liability costs, the bank offset pressure from declining yields on interest-earning assets, keeping net interest income from core deposit and loan operations positive.

Key data points:

• Deposit cost ratio: Continued decline, down 19 basis points (bps) from the beginning of the year; personal deposit cost ratio fell by 40 bps.
• Deposit scale: Remained stable, ranking second in the province. Personal deposits grew steadily.
• Retail customer base: 7.3272 million total retail customers, a net increase of 142,800 from the start of the year.

The decline in deposit cost ratios directly alleviated operational pressure from NIM compression, creating a buffer for core business profits. The rising share of personal deposits brought more stable, low-cost funding, providing ample ammunition for credit deployment.

Dual Strengthening: Risk Management and Capital Adequacy

The sustainability of a commercial bank's operations depends on the dual constraints and support of asset quality and capital strength.

Asset Quality

Over a five-year horizon, the bank's non-performing loan (NPL) ratio has shown a general downward trend. As of June 30, 2026:

• NPL ratio: 1.78%, down from the beginning of the year
• Provision coverage ratio: 191.69%, well above regulatory minimums, indicating ample buffers for potential loss absorption

These figures reflect the steady implementation of the bank's risk control strategy. The bank has managed the pace of new credit issuance while simultaneously identifying and disposing of existing risk assets. Specifically, it has embedded asset quality improvement throughout the entire credit process, moving risk prevention to the front line. For new loans, the bank strengthens industry and customer screening before approval, complemented by ongoing post-lending monitoring to minimize potential credit risks at the source. For existing assets, the bank gradually alleviates legacy pressure through regular inspections, collections, and disposals.

Capital Adequacy

As of June 30, 2026, all three core capital indicators improved:

| Indicator | Level | Change vs. End-2025 | |---|---|---| | Core Tier 1 Capital Adequacy Ratio | 8.75% | +0.54 ppts | | Tier 1 Capital Adequacy Ratio | 10.19% | +0.61 ppts | | Capital Adequacy Ratio | 12.28% | +0.66 ppts |

All indicators exceed regulatory minimums. Supported by internal accumulation from core business profitability and prudent management of risk-weighted asset growth, the bank's capital safety margin has further thickened, reserving ample space for real-economy credit expansion.

Development Path Rooted in Local Endowments

Credit allocation directly shapes a bank's business structure. For Bank of Lanzhou, the advancement of various specialized businesses is grounded in the industrial realities of Gansu Province, directing financial resources toward the genuine financing needs of the regional real economy.

Key Business Areas

• Industrial Finance: Aligned with Gansu's "14+1" key industrial chain initiative, focusing on local pillar industries such as non-ferrous metallurgy, energy, and equipment manufacturing. Service models extend beyond single-point credit to leading enterprises, using supply chain finance tools to reach upstream and downstream supporting entities.

• Green Finance: Leveraging Gansu's wind and solar resource endowments and the Yellow River Basin ecological protection scenario, the bank converts regional resource advantages into business growth drivers, continuously supporting new energy and traditional industry green upgrade projects. Green credit expanded steadily, with multiple green projects landed in H1.

• Tech Finance: Focusing on high-tech enterprises and "specialized and new" (专精特新) companies within Gansu Province.

• County-level & Inclusive Finance: Leveraging its full coverage of outlets within the province, the bank continues to extend services to county and rural markets. Agricultural loans and inclusive small and micro loans maintained steady growth. Services targeting family farms, farmer cooperatives, and county-level small and micro business entities further solidified the bank's locally rooted business base.

• Digital Transformation: Provides the technological foundation for refined operations. In H1 2026, the bank advanced the construction of its "Feitian" and "Lanxin" systems.

Results by Segment (as of June 30, 2026)

| Segment | Loan Balance (RMB) | Net Increase vs. Start of Year | Growth Rate | |---|---|---|---| | Green Loans | 19.792 billion | 1.870 billion | 10.43% | | Inclusive Small & Micro Loans | 16.056 billion | 583 million | Above bank average | | Agricultural Loans | 22.009 billion | — | — | | Sci-Tech Enterprise Loans | 18.551 billion | 1.880 billion | 11.28% |

The expansion of multiple specialized credit categories has allowed Bank of Lanzhou to move beyond homogeneous competition, converting regional resource endowments into business growth and solidifying its local customer base.

Conclusion

Currently, assessing the core competitiveness of regional banks is no longer simply anchored to scale growth. The weight given to a bank's local深耕 capability and refined management level continues to rise. By translating these strategies into effective tactics, Bank of Lanzhou has offered the market a new answer and perspective.

(Source: 21st Century Business Herald)