Analysis of the Impact of Slow Retail Transformation of Bank of Guizhou on Its Profitability

As the only provincial-level city commercial bank in Guizhou Province, Bank of Guizhou was established in 2012 with the approval of the former China Banking Regulatory Commission and listed on the main board of the Hong Kong Stock Exchange in December 2019 (stock code: 6199.HK). By the end of 2024, the bank’s total assets reached 589.987 billion yuan, an increase of 2.29% from the beginning of the year, with business outlets covering 88 counties (cities, districts) in Guizhou Province and a total of 5,604 employees [1].

In terms of retail transformation strategy, Bank of Guizhou has identified rural customer groups, trade union card holders, third-generation social security card holders, and salary payment groups as key target customer groups [2]. However, from an industry benchmarking perspective, the retail transformation process of Bank of Guizhou is relatively slow. The core indicator of retail transformation in the industry is the continuous increase in the contribution ratio of the retail sector to operating income and net profit, but Bank of Guizhou is still in the exploration stage of “liabilities first, then assets; customer acquisition first, then activation” [2]. Financial data for the first half of 2024 shows that the ratio of net fee and commission income to operating income of Bank of Guizhou was only 3.46%, significantly lower than the excellent level of the industry [3].

From the perspective of profitability, Bank of Guizhou achieved operating income of 12.418 billion yuan in 2024, a year-on-year increase of 9.46%; net profit was 3.779 billion yuan, a year-on-year increase of 3.43% [1]. The surface data shows a steady growth trend, but in-depth analysis reveals several hidden concerns.

In the first half of 2024, the net interest margin of Bank of Guizhou was 1.75%, down 41 basis points from the same period last year; the net interest yield was 1.68%, down 39 basis points year-on-year [3]. The sharp decline in net interest margin reflects the continuous pressure on asset-side pricing capabilities, which is closely related to the single customer structure and insufficient bargaining power caused by the lag in retail transformation.

In the first half of 2024, the average return on total assets (ROA) of Bank of Guizhou was 0.73%, down 0.07 percentage points from the previous year; the average return on equity (ROE) was 8.60%, down 1.11 percentage points year-on-year [3]. The simultaneous decline of the two indicators indicates that the bank’s capital utilization efficiency is decreasing, and its capital profit-making ability is facing challenges.

The income structure of Bank of Guizhou shows a typical feature of “heavy interest, light intermediary”. In the first half of 2024, although the proportion of net interest income still remained at a high level, it decreased by 13.77% year-on-year to 4.343 billion yuan [3]. The low proportion of intermediate business income is a key bottleneck restricting the improvement of profitability—although net fee and commission income increased by 2.43% year-on-year to 206 million yuan, its proportion in operating income was only 3.46% [3].

In contrast, leading peer banks with significant retail transformation results generally have an intermediate business income ratio of 15% to 25%, and retail businesses such as wealth management and consumer finance contribute more than 30% to profits. The gap of Bank of Guizhou in this dimension exactly reflects the structural shortcoming caused by the slow retail transformation process.

Continuous narrowing of net interest margin is the core profit challenge faced by Bank of Guizhou, and the lag in retail transformation has exacerbated this dilemma. The fundamental reason for the narrowing of net interest margin in the banking industry is the narrowing of deposit-loan spreads and intensified competition under the background of interest rate marketization. Traditional corporate business has difficulty in raising loan-side pricing due to strong customer bargaining power; on the liability side, the room for reducing interest costs is limited due to fierce deposit competition.

Retail business naturally has the following advantages: First, retail customers have relatively weak bargaining power, and banks have stronger pricing power in consumer loans, credit card installments and other businesses; second, retail deposits are more stable, which is conducive to asset-liability maturity matching management; third, retail customers can bring continuous intermediate business income opportunities. The slow retail transformation of Bank of Guizhou means that it cannot fully enjoy the above dividends and lacks effective hedging tools in the cycle of net interest margin decline [4].

Net fee and commission income is an important indicator to measure the development quality of retail banks. In the first half of 2024, the net fee and commission income of Bank of Guizhou accounted for only 3.46% of operating income, an increase of 0.33 percentage points from the previous year [3], with a limited increase and a low absolute level.

The core value of retail transformation lies in maximizing comprehensive income through in-depth customer management. Retail businesses such as wealth management, agency sales, payment settlement, and credit cards can bring stable fee income, and such income has the characteristics of low capital occupation, small risk exposure, and high marginal contribution rate. The insufficient contribution of retail business of Bank of Guizhou directly leads to weak growth of intermediate business income, which in turn affects the overall profitability and capital return level.

Bank of Guizhou has identified rural customer groups, social security card holders and other groups as key customer groups. Although these groups are large in scale and highly active, their individual value contribution is limited. More importantly, the customer structure dominated by corporate business and wholesale business makes asset quality more vulnerable to economic cycle fluctuations. By the end of 2024, the non-performing loan ratio of Bank of Guizhou was 1.72%, an increase of 0.04 percentage points from the beginning of the year [1]. Although the overall risk is controllable, the upward trend is worthy of attention.

Retail transformation can分散 risk concentration through diversified customer structure. Personal retail loans usually have the characteristics of small single amount and high dispersion, and the effect of portfolio risk management is better than that of large corporate loans. The lag in retail transformation means that Bank of Guizhou has room for improvement in customer structure and asset portfolio optimization.

2025 is a key year for the in-depth transformation of China’s banking industry. Against the background of continuous narrowing of net interest margin to a historical low of 1.42%, the industry generally recognizes that the profit model relying solely on interest income is unsustainable [4]. The banking industry is accelerating the shift from the logic of “deposit-based bank” to “AUM (Assets Under Management) is king”, and wealth management capability building has become a strategic focus.

At the same time, financial technology empowerment is reshaping the banking business model. The application of artificial intelligence, big data and other technologies in precision marketing, intelligent risk control, digital operation and other links can effectively reduce the marginal cost of retail business and improve customer experience. Although Bank of Guizhou has made some layout in digital infrastructure (as the first domestic bank whose main transaction systems are all deployed based on private cloud), the speed of transforming technical achievements into retail business applications still needs to be improved [5].

City commercial banks face a more complex competitive pattern. On the one hand, large banks continue to squeeze the living space of regional banks with brand advantages, financial technology strength and diversified product systems; on the other hand, regional banks have inherent shortcomings in capital supplement, risk pricing, talent training and other aspects. As the leading city commercial bank in Guizhou Province, Bank of Guizhou undertakes an important mission in serving the local economy and supporting small and medium-sized enterprises, but how to balance social responsibility and commercial sustainability is a problem that its retail transformation must face directly [5].

In view of the slow retail transformation of Bank of Guizhou, it is recommended to accelerate the transformation from the following dimensions:

Bank of Guizhou has clarified key directions such as rural customer groups and social security card holders. Next, it should establish a refined customer management system, identify the potential of high-value customers through data analysis, and implement differentiated service strategies. It can learn from the advanced experience of peers, build a “intelligent + manual + enterprise WeChat” collaborative operation model, and improve customer stickiness and value contribution [6].

It should accelerate the layout of wealth management businesses such as wealth management, agency sales, and fund investment advisory, enrich product shelves, and optimize asset allocation service capabilities. Wealth management is the core engine of retail bank profits and a key breakthrough to increase the proportion of intermediate business income.

Bank of Guizhou has certain advantages in infrastructure. It should increase the depth of integration between technology and business, and transform digital capabilities into practical capabilities of customer acquisition, activation and retention. Especially in the construction of mobile channels, it is necessary to continuously optimize the function experience of the super APP and build an online service ecosystem that is “convenient, fast, attractive, reliable and rewarding” [6].

The improvement of Bank of Guizhou’s profitability depends on multiple factors: first, the recovery of macro economy drives the recovery of real financing demand, providing support for asset-side pricing; second, the effect of retail transformation appears, and the proportion of intermediate business income increases steadily; third, risk management capabilities continue to be optimized, and provision coverage ratio and credit cost remain at a reasonable level; fourth, net interest margin stabilizes or narrows moderately, creating space for profit growth.

From the 2024 performance, Bank of Guizhou’s operating income and net profit both achieved positive growth, asset quality is generally controllable, and core indicators meet regulatory requirements [1]. After the new president Wu Fan officially took office, he is expected to lead the management to accelerate the retail transformation strategy and inject new momentum into profit growth.

Comprehensive analysis shows that the slow retail transformation of Bank of Guizhou has had a substantial impact on its profitability, mainly reflected in the continuous narrowing of net interest margin, low proportion of intermediate business income, and decline in return on capital. Against the background of overall net interest margin pressure in the banking industry and accelerated retail transformation of the industry, Bank of Guizhou needs to face up to the gap, speed up the pace, and cultivate retail business as a new profit growth pole.

Bank of Guizhou has the unique advantage of deepening in the regional market. Its large county-level network and stable customer base are solid foundations for its retail transformation. If it can effectively grasp the opportunity of financial technology empowerment, deepen customer management and wealth management capability building, Bank of Guizhou is expected to make breakthroughs in the retail transformation path, thereby improving its overall profitability and sustainable development capability.

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[1] Tencent News - “Bank of Guizhou’s 2024 Revenue and Net Profit Both Increased, First Female President Wu Fan Officially Took Office” (https://news.qq.com/rain/a/20250401A0A4DA00)

[2] Sina Finance - “Bank of Guizhou: Accelerate Retail Transformation and Development” (https://finance.sina.com.cn/stock/relnews/hk/2024-03-30/doc-inaqafvz9696853.shtml)

[3] Hong Kong Stock Exchange - Bank of Guizhou 2024 Interim Report (https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0906/2024090600362_c.pdf)

[4] Xinhuanet - “2025 Banking Industry Reshapes ‘Command Stick’ Multi-Party Joint Efforts to Draw a Resilient Year” (http://www.xinhuanet.com/20251226/7c815ef38e4449de99dfca7bf3430f9d/c.html)

[5] Hong Kong Stock Exchange - Bank of Guizhou 2024 Annual ESG Report (https://www1.hkexnews.hk/listedco/listconews/sehk/2025/0430/2025043002360_c.pdf)

[6] Guiyang Bank Co., Ltd. 2025 Semi-Annual Report (http://dataclouds.cninfo.com.cn/shgonggao/2025/2025-08-26/ee529d6681a211f09fcafa163e957f7a.pdf)