In-Depth Analysis of Bank of Hangzhou's Characteristic Advantages in Sci-Tech Innovation Finance and Its Ability to Address Net Interest Margin Challenges

Based on the collected data and analysis, I will provide you with a systematic answer to this question.

Currently, Chinese commercial banks are facing severe pressure from continuous narrowing of net interest margin. According to data from the State Administration of Financial Regulation, the net interest margin of commercial banks has declined rapidly from above 2% in 2022 to 1.42% as of the third quarter of 2025, a historical low [1]. Previously, regulators set 1.8% as the “deduction threshold” for net interest margin assessment, but this assessment has essentially been suspended since 2023 [1].

• Asset-side Pressure
  : Fierce competition in lending leads to “rapid interest rate declines”; lending rates for some large enterprises are significantly lower than the yield of treasury bonds with the same maturity, resulting in “involution-style” competition
• Liability-side Rigidity
  : Deposit rates are “hard to reduce”; some banks use manual interest supplements and other methods to “visibly cut but actually raise” the lowered deposit rates
• Dual Decline in Interest Margins
  : The loan-to-deposit interest margin continues to narrow, putting pressure on banks’ profitability

Analysts from Morgan Stanley pointed out that the net interest margin of U.S. commercial banks is generally above 2%. Considering that Chinese commercial banks have well-controlled cost-to-income ratios, a reasonable net interest margin level should be 1.6%-1.8% [1]. Currently, the overall net interest margin level of the industry is relatively low, and some banks have already faced the dangerous situation of “inversion” between non-performing loan ratio and net interest margin.

• Since the second half of 2025, signs of marginal improvement in net interest margin have emerged
• A large number of long-term time deposits made between 2022 and 2023 have matured and been repriced
• Regulators are guiding the industry to “counter involution”, and banks are focusing on improving their market pricing capabilities

The establishment of Bank of Hangzhou’s Sci-Tech Innovation Finance Headquarters marks a further elevation of its strategic position, significantly enhancing the collaboration among various business lines within the bank [3].

• Integrated and established the Sci-Tech Innovation Finance Headquarters, positioned as a head-office-level profit center combining management and operation
• Deployed 7 sci-tech innovation centers in Hangzhou, Beijing, Shanghai, Shenzhen, Jiaxing, Hefei, and Ningbo
• Established sci-tech innovation finance characteristic institutions under each branch, forming a vertically integrated organizational structure

• Cultivated interdisciplinary professionals with expertise in technology, market, and finance
• Equipped with special incentive mechanisms, reducing the assessment weight of traditional deposit and loan profits, and increasing the weight of process indicators such as the number of served customers and product coverage

• A complete “6+1” product chain: Keyi Loan, Kebao Loan, Growth Loan, Bank-PE Co-Loan, Integrity Loan, Bole Rong, and Option Rights
• Meets the financial needs of sci-tech innovation enterprises at different life cycles [3]

• Established a sci-tech innovation enterprise database and built a multi-dimensional evaluation system covering technology, industry, etc.
• Integrated government-related enterprise data and self-owned data through the “Five-in-One” Hangchuang E-Station
• Realized “no need to fill in forms, one-click credit limit with authorized data” for customer financing [4]

Bank of Hangzhou has established a “Five Independences” guarantee mechanism for sci-tech innovation finance business [3]:

• Independent Organizational Structure
  : Sci-tech innovation finance specialized institutions operate independently
• Independent Business Collaboration Policies
  : Provide professional services around pre-investment, investment, and post-investment stages for investors
• Independent Credit Approval Mechanism
  : Credit approval within the quota of RMB 40 million can be completed in one stop at specialized institutions
• Independent Risk Tolerance Policy
  : Independently issued risk tolerance indicators and implemented due diligence exemption
• Independent Internal Risk Rating Mechanism
  : Established a credit rating model for sci-tech innovation enterprises

Sci-tech innovation enterprises have the characteristics of “high risk + lack of collateral”; Bank of Hangzhou obtains risk premium compensation through a professional risk assessment system:

The risk pricing advantage of sci-tech innovation finance business can effectively hedge against the downward pressure on traditional loan yields, with the expected risk premium contribution being approximately 35% [3].

The full-life-cycle service model for sci-tech innovation enterprises significantly enhances customer stickiness:

• Start-up Stage
  : Provides pre-approved credit through the “Hidden Dragon Program”, a RMB 5 million quota pure credit loan
• Growth Stage
  : Deeply binds customers through Bank-PE Co-Loan and Option Rights Loan
• Mature Stage
  : Provides comprehensive financial services such as M&A funds and employee stock ownership plans

Bank of Hangzhou has cumulatively nurtured 327 companies to go public, and its coverage rate of Hangzhou’s unicorn and quasi-unicorn enterprises reached 90% in 2025 [4]. The high-stickiness customer group brings stable deposit accumulation and intermediate business income, with the expected contribution from customer stickiness being approximately 30%.

Sci-tech innovation finance business drives the growth of diversified non-interest income:

Bank of Hangzhou has achieved full coverage of four types of entities in sci-tech innovation bond underwriting (state-owned/private sci-tech enterprises, state-owned/private equity investment institutions), and the scale of custody for venture capital funds exceeds RMB 151.2 billion [3].

The professional capabilities in sci-tech innovation finance endow Bank of Hangzhou with stronger pricing power:

• Information Advantage
  : Reduces information asymmetry through the five-dimensional evaluation system of “industry + invested entities + team + technology + policy”
• Product Advantage
  : The complete product chain meets diverse needs, reducing customer churn
• Service Advantage
  : Specialized institutions provide one-stop services, enhancing customer experience

It is expected that the comprehensive yield of Bank of Hangzhou’s sci-tech innovation finance business is 50-80 basis points higher than that of traditional corporate banking business.

As of the end of June 2025, the balance of Bank of Hangzhou’s sci-tech loans reached RMB 115.18 billion, maintaining good asset quality [4]. The balance of financing exposure to sci-tech innovation enterprises has grown steadily, and the scale of custody for venture capital funds continues to expand.

Based on the latest financial data, Bank of Hangzhou has demonstrated strong profitability [0]:

Bank of Hangzhou’s current price-to-book ratio (P/B) is 0.81x, and price-to-earnings ratio (P/E) is 6.01x. Compared with its characteristic advantages in sci-tech innovation finance and growth potential, the valuation provides a good margin of safety [0].

• Net Interest Margin Operating at the Bottom
  : The expected further narrowing of net interest margin in 2026 will be within 5 basis points, and differentiation among banks will intensify [2]
• Asset Quality Pressure
  : The high-risk characteristics of sci-tech innovation enterprises require continuous strengthening of risk management
• Intensified Competition
  : Peer institutions have increased their investment in sci-tech finance

• Business Concentration Risk
  : Sci-tech innovation finance customers are concentrated in specific industries and regions
• Talent Dependence Risk
  : The development and stability of the professional talent team are crucial
• Model Replication Risk
  : The replicability and large-scale expansion of the Sci-Tech Innovation 3.0 model

1. Deepen the Sci-Tech Innovation 3.0 Model
   : Continuously improve the growth assessment model for sci-tech innovation enterprises and enhance digital service capabilities
2. Expand Business Boundaries
   : Further expand service coverage based on the existing seven sci-tech innovation centers
3. Strengthen Synergistic Effects
   : Enhance business collaboration between sci-tech innovation finance, transaction banking, and investment banking
4. Optimize Income Structure
   : Increase the proportion of non-interest income and reduce dependence on net interest income

Against the backdrop of regulators guiding the industry to “counter involution” and the stabilization of net interest margin, Bank of Hangzhou’s characteristic advantages in sci-tech innovation finance will become more prominent. With the continuous growth of financial service demand from sci-tech innovation enterprises and increased policy support, sci-tech innovation finance is expected to become the core driver for Bank of Hangzhou to navigate economic cycles and achieve high-quality development.

Looking ahead to 2026, Bank of Hangzhou is expected to achieve differentiated breakthroughs in the environment of net interest margin operating at the bottom by virtue of its first-mover advantage and professional capabilities in sci-tech innovation finance, and continue to consolidate its leading position as a “Sci-Tech Bank with Chinese Characteristics”.

[1] Sina Finance - “Signs of Stabilization in Bank Net Interest Margin: Should Ordinary People Change Their Financial Management Ideas?” (https://finance.sina.com.cn/wm/2025-12-25/doc-inhczhsf3309370.shtml)

[2] Sina Finance - “In-Depth Report | 2026 Banking Industry Strategy: Structural Opportunities at a New Starting Point” (https://finance.sina.com.cn/stock/stockzmt/2026-01-07/doc-inhfmtvz7733567.shtml)

[3] Eastmoney.com - “Research Report on Sci-Tech Innovation Finance of Bank of Hangzhou (600926.SH)” (https://pdf.dfcfw.com/pdf/H3_AP202403071625916763_1.pdf)

[4] MBCaijing - “Deeply Engaged in the New Track of Sci-Tech Finance: Bank of Hangzhou Becomes the Bank That “Best Understands” Technology” (https://www.mbcaijing.com/article/WD7%2B6npSBx8%3D)

[5] Securities Times - “Internal Promotion! Bank of Hangzhou’s New President is Appointed!” (https://www.stcn.com/article/detail/3588210.html)

[0] Jinling API Data - Bank of Hangzhou Company Profile and Stock Price Data