What is the signal that banks are finally closing?
Recently, according to the data released on the official website of the State Administration of Financial Supervision and Administration, in 2023, a total of 773 subordinate outlets of the six major state-owned banks, namely ICBC, Agricultural Bank of China, CCB, Bank of China, Bank of Communications and Postal Savings Bank, will announce the closure.
What is the logic and reason behind the closure of kindergartens and supermarkets, and even the closure of banks? What is the signal released?
In my opinion, there may be several factors for such a large number of bank closures in a year.
First, China's economy is under great pressure. As the core of finance, banks control the flow of funds in all economic activities in the country. The continuous closure of bank branches means that the volume of banking business is reduced, but in fact, it also reflects the restriction and compression of economic activities. In 2023, although China's total economic output exceeded 126 trillion yuan, the economic growth rate reached an unexpected 5.2%. However, if the purchasing power of the currency is converted into US dollars, China's economy will decline slightly in 2023. As a result, China's share of the U.S. economy will drop from 77% in 2021 to 65% in 2023.
Therefore, this is also the reason why the vast majority of people felt that it was difficult to earn money and live last year, and did not feel the temperature and vitality of the unexpected economic growth. It can be said that last year's economic growth was a structural and partial growth, and it was a high economic growth brought about by a small number of industries and a small number of people, but the majority of the people are still dry.
This can also be confirmed from the recent financial report disclosed by China Merchants Bank. According to the 2023 financial report of China Merchants Bank, the assets held by Golden Sunflower and above customers, which account for only 2.4% of all customers of China Merchants Bank, reached 10.82 trillion yuan. The assets of all customers of China Merchants Bank in 2023 will only be 13.32 trillion yuan. This means that 2.4% of people own 81.23% of wealth.
This reflects the objective fact that wealth and assets are concentrated in a small number of people, and the objective phenomenon of the widening gap between the rich and the poor between people. And most people have less money, which means that they will go to the bank less and less. This is one of them.
Second, the profitability of banks has decreased. In 2023, it is a well-known fact that in order to ensure the development of the real economy and reduce financing costs, the state has cut the reserve requirement ratio and interest rates many times, so that finance can truly serve the real economy and benefit the real economy. As far as the interest rate of individual housing loans is concerned, it fell to 4.1% at one time last year, and the average annual mortgage of each household can be reduced by several thousand yuan.
That's pretty powerful. And all this, of course, is achieved by compressing the net interest margin of the bank, that is, the profit margin of the bank. As a result, data released at the end of the third quarter of last year showed that the net interest margin of domestic banks fell to 1.73% at one point, falling below the warning line of 1.8% and hitting a record low.
Therefore, the income of these major domestic banks basically decreased year-on-year. For example, the revenue of ICBC, the largest bank in China, was only 843.1 billion yuan last year, a year-on-year decrease of 3.73%. Therefore, the reduction of profitability, in order to reduce costs and increase efficiency, it is inevitable that some outlets with low business volume and low profitability can only be closed. This is the second one.
The third is the significant reduction in non-cash business brought about by digital currency transactions. This is also an objective reality, and now basically young people rely on online banking, mobile banking, or third-party online payments such as WeChat and Alipay. Cash-like transactions are very rare. One consequence of this has been a significant reduction in the bank's counter operations.
Therefore, a predictable trend is that the wave of bank closures will continue, so let's wait and see!