Rural banks are exiting in batches; who is taking over?

Introduction: There are quite a few rural commercial banks attempting to expand across regions by leveraging the "village bank-to-branch" conversion strategy.

After failing to pass the IPO hurdle, a local rural commercial bank swallowed seven village banks in two years. Is this strategic foresight or a high-stakes gamble?

On July 13, Shenzhen Longhua Xinhua Village Bank was officially dissolved, and its original site was converted into the Shenzhen Longhua Sub-branch of Shunde Rural Commercial Bank.

This is the second case of "village bank-to-branch" conversion in Shenzhen, and also marks the first time its successor, Shunde Rural Commercial Bank, has entered the Shenzhen market across regions.

The predecessor of Shunde Rural Commercial Bank was the Shunde Rural Credit Cooperative established in 1952, which was restructured into a rural commercial bank in December 2009, becoming one of the three rural commercial banks in Guangdong Province to successfully complete restructuring in the first batch.

At the beginning of the restructuring, its total assets were approximately 93 billion yuan, with a non-performing loan ratio as high as 3.77%. By the end of 2025, its total assets approached the 500 billion yuan mark, making it the largest county-level corporate financial institution in China.

Shunde Rural Commercial Bank has walked this path for over seventy years, spending a full eight years on the road to an IPO.

Starting from IPO preparation in 2017, the prospectus was accepted in 2019. In 2023, it switched to the registration-based review system, but subsequently oscillated between "suspended" and "accepted" due to expired financial documents.

In July 2025, Shunde Rural Commercial Bank withdrew its IPO application, and the Shenzhen Stock Exchange terminated the review.

At that time, the bank's revenue had dropped from 8.965 billion yuan in 2022 to 8.377 billion yuan in 2024, and net profit shrank from 3.445 billion yuan to 3.177 billion yuan.

For the full year of 2025, operating income was 7.716 billion yuan, a year-on-year decrease of 7.14%; after-tax net profit was 2.937 billion yuan, a year-on-year decrease of 13.59%. Net profit has been declining for four consecutive years. Affected by the LPR cut, the net interest margin has dropped to 1.27%.

In the first quarter of 2026, revenue increased by 5.34% year-on-year to 1.805 billion yuan, with revenue growth turning positive, but net profit continued to decline by 9.86% year-on-year to 448 million yuan.

On July 16, United Credit Ratings maintained Shunde Rural Commercial Bank's main body credit rating at AAA with a stable outlook. However, a report from this rating agency also pointed out that in recent years, affected by the decline in asset-side returns, Shunde Rural Commercial Bank's net interest margin has continued to narrow, and overall operating income has decreased. Meanwhile, the significant provision for impairment has had a certain impact on net profit, causing profitability indicators to decline.

With both revenue and profit declining and asset quality under pressure, forcing an IPO would only amplify shortcomings.

After withdrawing the IPO, Shunde Rural Commercial Bank quickly shifted its strategic focus to scale expansion, with the "village bank-to-branch" model being the most direct path.

Chairman Li Yixin defined this layout as a "historic leap from a local rural commercial bank to a regional rural commercial bank," stating that it would revolve around the core strategy of "one body, two wings, and three empowerments," deeply cultivating the local market, and promoting grid-based services.

In 2025, Shunde Rural Commercial Bank successively absorbed six Greater Bay Area village banks: Foshan Gaoming Shunyin Village Bank, Sanshui Zhujiang Village Bank, Foshan Nanhai Xinhua Village Bank, Dongguan Changping Xinhua Village Bank, Guangzhou Panyu Xinhua Village Bank, and Jiangmen Xinhui Xinhua Village Bank. In July this year, it merged with Shenzhen Longhua Xinhua Village Bank.

Seven banks in two years; this speed is considered radical even among rural commercial banks in Guangdong and nationwide. Its strategic logic may lie in rapidly expanding its operational radius at a lower cost and seeking new growth narratives after the IPO door was temporarily closed.

After the cross-regional expansion, the seven newly merged village banks cannot contribute positive profits in the short term and must bear integration costs such as system transformation, personnel placement, and asset collection.

They come from different sources, and the complexity of integration varies significantly.

Foshan Gaoming Shunyin Village Bank was the first village bank established with Shunde Rural Commercial Bank as the main sponsor. The absorption merger is essentially an internal integration within the sponsor-village bank system, with relatively fewer obstacles.

Sanshui Zhujiang Village Bank originally belonged to the Guangzhou Rural Commercial Bank system, so the merger belongs to asset integration between different rural commercial banks within the province.

The remaining five, including Foshan Nanhai Xinhua, Dongguan Changping Xinhua, Guangzhou Panyu Xinhua, Jiangmen Xinhui Xinhua, and Shenzhen Longhua Xinhua, all belong to the Xinhua Village Bank series initiated by Ma'anshan Rural Commercial Bank in Anhui Province.

Taking over off-site village banks in Guangdong from Ma'anshan Rural Commercial Bank constitutes a cross-bank merger and restructuring, which is far more complex in terms of customer culture, risk control standards, and personnel integration than internal consolidation.

For example, village banks generally suffer from poor asset quality, with high non-performing loan ratios, and some assets are difficult to value accurately. During the merger process, how to fairly evaluate and dispose of these problematic assets to avoid transferring too much risk to the receiving bank requires complex due diligence and risk assessment work. In addition, the main sponsor needs to take over existing non-performing assets during the restructuring, bear reform costs such as system docking and personnel adjustment, and capital occupation will also increase accordingly.

In other words, what Shunde Rural Commercial Bank took over was not just a batch of outlets, but an entire set of credit culture, risk appetite, and operational processes completely different from its own.

The overly long cross-provincial management radius and the difficulty in adapting regional talent are speculated by the industry to be reasons for Ma'anshan Rural Commercial Bank's exit.

As of the end of 2024, the non-performing loan ratio of village banks under Shunde Rural Commercial Bank was 2.01%, up 0.38 percentage points year-on-year, significantly higher than the bank's overall non-performing loan ratio of 1.61% during the same period.

If these high non-performing assets are merged into the head office's financial statements, the collection and disposal costs are real in the medium to long term.

From the end of 2020 to the end of 2024, the bank's non-performing loan ratio rose from 0.94% to 1.61%, climbing for four consecutive years. The balance of non-performing loans increased from 1.743 billion yuan to 4.143 billion yuan, growing by 1.37 times in four years. The provision coverage ratio dropped from a high of 342.11% to 174.78%.

By the end of 2025, the bank's total non-performing loans were 3.914 billion yuan, with a non-performing loan ratio of 1.51%, down 0.10 percentage points from the end of the previous year, achieving the first "double drop" in recent years.

However, whether carrying the "double drop" in village bank asset quality allows it to go further and longer remains to be tested by time.

During the time window of large-scale absorption and merger of village banks and integration of off-site assets, the weakness of the internal control system is particularly worthy of attention.

Since 2026, Shunde Rural Commercial Bank has received regulatory fines intensively. On March 5, the Yingde Sub-branch received a fine for "inaccurate loan risk classification." On March 6, the head office was also penalized for "imprudent loan management," and relevant responsible persons were warned.

On July 10, the same day the approval for the dissolution of Shenzhen Longhua Xinhua Village Bank landed, the Enping Sub-branch was fined again for "inaccurate loan risk classification and inadequate post-loan management."

The fines concentrated in the two areas of loan risk classification and post-loan management are exactly the core links of bank asset quality management.

Frequent credit compliance issues often mean systemic loopholes in pre-loan investigation, mid-loan approval, and post-loan management.

On the very same day the Shenzhen Longhua Sub-branch opened, Shunde Rural Commercial Bank announced that President Wang Lei resigned from his positions as executive director and president due to job transfer. His tenure lasted only a little over two years.

Wang Lei's resume is impressive. He has worked deeply in the People's Bank of China system for over 20 years, serving as Deputy Director of the Investigation and Statistics Department and Monetary Credit Management Department of the Guangzhou Branch of the People's Bank of China, President of the Zengcheng Sub-branch, and Director of the Second Business Department of the Business Management Department of the Guangzhou Branch. He was later transferred to serve as Director of the Financial Work Bureau of Foshan City, Deputy Secretary-General of the Foshan Municipal Government, Deputy Party Secretary of Shunde Rural Commercial Bank, and officially approved as President in April 2024.

The absorption and merger of all seven village banks was also completed under Wang Lei's leadership during his tenure.

With the key operator leaving at a critical moment in M&A integration, the continuity of strategy and the advancement of the second half of integration will face a completely new management framework. Personnel adjustments will bring about a phased review of business plans, and the original off-site layout plan will be adjusted in line with the thinking of the new management team. The internal team also needs a necessary adaptation process.

With Wang Lei's departure, opportunities and challenges coexist for the future new president of Shunde Rural Commercial Bank. The new president must stabilize the bottom line of asset quality while converting scale expansion into tangible efficiency improvements.

Under the regulatory framework of "reducing quantity and improving quality," the reform and restructuring of village banks have become an irreversible industry trend.

Since 2026, more than 130 village banks nationwide have completed their exit, averaging more than 20 per month. This has given city commercial banks and rural commercial banks the opportunity to expand their business scope.

For example, Changshu Bank alone acquired seven off-system village banks in 2025, expanding its territory from Nanjing to Yangzhou, Suqian, Yancheng, and Changzhou. Rural commercial banks such as Jiangnan Rural Commercial Bank, Wuxi Bank, Kunshan Rural Commercial Bank, and Suzhou Rural Commercial Bank are among the many attempting to achieve cross-regional layout by leveraging the "village bank-to-branch" strategy.

"Merger and restructuring, reducing quantity and improving quality" is the main line of reform and risk resolution for small and medium-sized banks. But whether "quality improvement" can truly arrive after "quantity reduction" depends on whether each bank participating in the restructuring can effectively digest the assets it swallows.

For Shunde Rural Commercial Bank, continuing to expand scale and betting on the long-term realization of synergies in the Greater Bay Area depends on a more realistic premise—whether the inherited customers stay, whether the taken-over assets can be digested, and whether the integrated employees can truly integrate.

After the "passionate M&A," the real test has just begun.