– Bohai Bank announces a record 698.33 billion yuan debt package transfer at approximately 70% of face value, the largest disclosed by a中小银行 (small and medium-sized bank) this year. – The bank’s non-performing loan ratio stands at 1.81%, the highest among national joint-stock banks, driven by personal and real estate exposures. – This disposal is part of a broader industry trend, with multiple中小银行 (small and medium-sized banks) accelerating non-performing asset disposal to free up capital for new lending. – The move aims to improve Bohai Bank’s capital adequacy, which fell to 11.24% in H1 2025, and support strategic shifts toward growth sectors. – Market participants should monitor the efficiency of batch transfers and the impact on bank profitability and risk management.
Unprecedented Debt Package Transfer Sets New Benchmark
In a bold move that underscores the mounting pressure on asset quality, Bohai Bank (渤海银行) has disclosed plans to transfer a colossal 698.33 billion yuan debt package via public listing, marking the largest single debt disposal publicly announced by a中小银行 (small and medium-sized bank) in 2025. This transaction not only highlights the bank’s urgent need to address non-performing assets but also signals a broader industry shift toward规模化 (scaled-up) non-performing asset disposal. With financial institutions grappling with economic headwinds, such disposals are becoming a critical tool for capital management and operational resilience.
Breakdown of the 698.33 Billion Yuan Package
The debt package, detailed in Bohai Bank’s Hong Kong Exchange filing, comprises 499.37 billion yuan in principal, 104.36 billion yuan in interest, 93.34 billion yuan in penalty interest, and 1.26 billion yuan in advance judicial fees, spanning 174 debtor entities. Loan-related debts dominate the portfolio, involving 108 entities and 318.78 billion yuan in principal, accounting for over 60% of the total. Asset management plan debts follow, with 170.09 billion yuan in principal from 32 entities, while the remainder includes票据 (bill),保理 (factoring), and信用证 (letter of credit) debts totaling 10.5 billion yuan. The minimum transfer price is set at 488.83 billion yuan, representing a roughly 30% discount on the total debt value but only a 1.8% discount on the principal amount, reflecting the bank’s strategy to expedite non-performing asset disposal while minimizing losses.
Buyer Restrictions and Staged Implementation
To ensure regulatory compliance and market stability, potential buyers are limited to four national asset management companies (AMCs)—including中国信达 (China Cinda) and中国东方 (China Orient)—specifically their天津 (Tianjin) branches, alongside two local AMCs:天津津融 (Tianjin Jinrong) and滨海正信 (Binhai Zhengxin). Under banking regulations, AMCs must make an initial payment of at least 30% for bulk acquisitions, translating to an upfront cash requirement of approximately 146.65 billion yuan. Bohai Bank has sought shareholder approval to execute the transfer in batches, a approach designed to mitigate market disruption and align with the phased nature of non-performing asset disposal. This structured method helps manage liquidity impacts while advancing the bank’s asset quality goals.
Bohai Bank’s Deteriorating Asset Quality Profile
The massive debt transfer is a direct response to Bohai Bank’s escalating asset quality challenges. According to its 2025 interim report, the bank’s combined non-performing and watchlist loans reached 450.34 billion yuan, a increase of 24.91 billion yuan from the end of 2024. The non-performing loan ratio surged to 1.81% in the first half of 2025, significantly exceeding the 1.49% average for commercial banks and ranking highest among national joint-stock banks. This deterioration underscores the urgency of the bank’s non-performing asset disposal initiatives, which aim to shore up financial stability and restore investor confidence amid sector-wide pressures.
Concentrated Risks in Personal and Real Estate Loans
Bohai Bank’s non-performing assets are heavily concentrated in two high-risk segments. Personal loans account for 95.3 billion yuan of non-performing exposures, representing 55% of the total, with the consumer loan non-performing rate peaking at 12.37% in 2024. Although real estate non-performing loans declined to 2.02% as of June 2025 from 3.65% at the end of 2023, the sector remains fraught with complexity due to numerous legal disputes, complicating recovery efforts. These concentrations highlight the targeted need for non-performing asset disposal in vulnerable areas, as the bank works to rebalance its portfolio toward less risky, higher-yielding assets.
Historical Context of Bohai Bank’s Asset Disposal Efforts
The current transfer is the latest in a series of disposals initiated under Bohai Bank’s asset optimization strategy launched in 2024. In March 2024, the bank sold a 56.67 billion yuan principal debt package for 39.67 billion yuan, followed by a November 2024 disposal of 289.65 billion yuan in principal and interest for 207.24 billion yuan. Most recently, in September 2025, it transferred a 256.03 billion yuan principal package for 202.74 billion yuan. Cumulatively, these actions bring the total planned disposals to over 1 trillion yuan in under two years, demonstrating a sustained commitment to non-performing asset disposal as a core component of the bank’s turnaround plan.
Financial Impact and Capital Adequacy Objectives
Bohai Bank estimates that the latest transfer will generate a positive financial impact of 5.73 billion yuan, primarily through reduced provisioning needs and enhanced liquidity. More critically, it is expected to bolster the bank’s capital adequacy ratio, which dipped by 0.39 percentage points to 11.24% in the first half of 2025. By clearing out high-capital-consumption, low-liquidity assets, the bank aims to meet regulatory thresholds more comfortably and redirect resources toward strategic areas like普惠金融 (inclusive finance) and绿色信贷 (green credit). This proactive non-performing asset disposal approach is essential for maintaining solvency and supporting future growth initiatives.
Industry-Wide Acceleration in Non-Performing Asset Disposal
Bohai Bank’s move is emblematic of a broader trend among中小银行 (small and medium-sized banks), which have ramped up non-performing asset disposal activities since the fourth quarter of 2025. For instance,广州农商银行 (Guangzhou Rural Commercial Bank) announced in October its intention to transfer a 189.28 billion yuan credit asset package—comprising 149.78 billion yuan in principal and 38.97 billion yuan in interest—at a minimum price of 122 billion yuan, reflecting a 35% discount. This marks the bank’s second large-scale disposal within a year, emphasizing the sector’s focus on efficient non-performing asset disposal to unlock capital.
Common Characteristics and Strategic Goals
Recent disposals share several key features: packages often exceed 100 billion yuan, discounts range from 30% to 35%, and buyers are predominantly local state-owned AMCs. Data from the银登中心 (China Banking Association Credit Asset Registration and Circulation Center) show additional listings from南京银行 (Bank of Nanjing),兰州农商银行 (Lanzhou Rural Commercial Bank), and other regional lenders. The primary objective is capital liberation, enabling banks to reallocate funds toward emerging sectors while complying with stricter regulatory requirements. This规模化 (scaled-up) non-performing asset disposal not only cleans up balance sheets but also fosters a more resilient banking ecosystem.
Financial Performance and Forward-Looking Implications
Despite asset quality headwinds, Bohai Bank has shown signs of operational improvement, with H1 2025 revenue rising 8.14% year-over-year to 142.15 billion yuan and net profit increasing 3.61% to 38.30 billion yuan. However, the effectiveness of its non-performing asset disposal strategy will be closely watched, particularly the pace of batch transfers and the subsequent optimization of asset structures. Investors and analysts are keen to assess whether these efforts will translate into sustained profitability and reduced risk exposure, especially as economic uncertainties persist.
Market Monitoring and Investment Considerations
The success of Bohai Bank’s and other banks’ disposals will depend on execution efficiency, recovery rates, and the ability to navigate regulatory landscapes. Stakeholders should track announcements from bodies like the中国银保监会 (China Banking and Insurance Regulatory Commission) for guidance on non-performing asset disposal norms. Additionally, monitoring AMC acquisition patterns and secondary market activity can provide insights into valuation trends and potential investment opportunities in distressed assets. As non-performing asset disposal accelerates, it may create openings for strategic investors to engage in asset restructuring or partnerships. The escalating scale of non-performing asset disposal among Chinese banks, exemplified by Bohai Bank’s record transfer, underscores a critical juncture for the sector. By addressing asset quality issues head-on, institutions can enhance capital flexibility, support economic priorities, and mitigate systemic risks. Investors and executives should prioritize due diligence on disposal outcomes, assess banks’ adaptation to post-disposal structures, and consider aligning with institutions demonstrating robust risk management and strategic clarity in their non-performing asset disposal endeavors.