Jiangnan Renewal Bank’s shares jumped 12.4% in Shanghai on Friday after a public hearing in Hangzhou revealed the source of its fastest profit growth in years. The lender reported third-quarter net profit of 9.84 billion yuan (about €1.25 billion), up 4.7% from a year earlier, while disclosing that a city-backed supplier rescue programme had helped cut its expected loan losses.
The hearing examined the programme, which guarantees lending to suppliers awaiting payment from large buyers. Jiangnan said it had covered 63,000 businesses. It also revealed that 2.6 billion yuan (about €330 million) in provisions for possible bad loans had been released this year, with a substantial portion tied to loans covered by the guarantee scheme.
A record quarter, with a catch
Investors greeted the figures as a clean win. The closing share price was the bank’s highest in nearly eight years, and trading volume more than tripled its 30-day average. The result outpaced analysts’ expectations and gave a rare lift to a sector squeezed by weak demand for credit and pressure on lending margins.
At the hearing, deputy general manager Valérie Prevost said the programme had helped viable suppliers keep operating while they waited for overdue invoices to be paid. “The improvement is not a trick of the calendar; it reflects firms that are still producing and meeting their obligations,” she told panel members. The bank says it will publish a fuller breakdown of the guarantee-backed loans with its annual results.
The key uncertainty is who ultimately carries the loss if a borrower fails. The programme’s guarantee is backed by Hangzhou’s municipal finance arm, but the panel heard that the city has not yet published a stress test showing how much it could pay under a broad downturn. Jiangnan did not disclose the share of its released provisions linked to that backstop.
“This is a victory built on a bridge that expires in 18 months.” — Dhiraj K. Krish, banking economist
Krish said the earnings release was genuinely strong, but warned that investors may be treating temporary support as lasting improvement. Greta Bernier-Sauer, a credit-risk researcher, said moving potential losses to a public guarantee did not make them disappear. “If the city has to step in, the bill lands on the same local economy the bank is trying to support,” she said.
A leadership handover ahead
Prevost also confirmed she would leave her post at the end of October. The bank described the departure as a planned transition and said its board had approved the timing; she did not link it to the hearing. Her exit puts extra attention on whether the bank’s next management team will keep expanding the supplier scheme or slow it down.
Jiangnan’s result stands out as lenders across China compete for borrowers while local authorities try to keep small manufacturers paid and working. The bank says its non-performing loan ratio fell to 1.18%, but that figure does not capture every risk in loans supported by guarantees. The panel is due to publish recommendations on 3 November, including whether such schemes should face public limits.
For now, investors have chosen to celebrate a record quarter and a lender that says it has kept tens of thousands of suppliers afloat. But the hearing has made the source of the good news impossible to ignore: part of the bank’s improved balance sheet rests on a promise from a city whose capacity to honour it has not yet been tested.
