Text/Tsinghua Financial Review, Qin Ting
Judging from the major banks that have published their 2023 annual reports, many banks have experienced a year-on-year decline in non-interest income. According to the analysis, since last year, affected by changes in the financial market, investors' risk appetite has declined, fund stock prices have fluctuated greatly, wealth management products have also been unstable, and the business income of bank agency sales has generally been significantly affected; coupled with the implementation of various policies such as fee reduction and interest concessions, on the whole, the non-interest income of banks has fluctuated greatly.
However, the development of mid-income business and the increase of non-interest income are still the inevitable choices for the development of banking business in a low-interest rate environment. At present, the intermediary business of domestic commercial banks still has great potential for development and improvement in terms of total income and income structure, service scope and innovation ability, service charging concept, and the development and application of financial technology. Banks are also actively deploying wealth management agency business.
As net interest margins continue to narrow, banks are increasingly focusing on improving operating performance by increasing intermediate income. However, the 2023 annual reports released recently show that the non-interest income of many banks has a clear trend of declining instead of rising, especially the intermediate business is generally under pressure. Among them, due to the fluctuation of wealth management, mutual funds and other product distribution business, some bank fees and commission income decreased significantly year-on-year.
Specifically, judging from the major banks that have published their 2023 annual reports, many banks have experienced a year-on-year decline in non-interest income. In terms of the total number, the non-interest income of the five major banks in 2023 will exceed 100 billion yuan, of which the non-interest income of ICBC will exceed 188 billion yuan in 2023, ranking first, Bank of China and China Construction Bank will also exceed 150 billion yuan respectively, and the non-interest income of China Merchants Bank and Agricultural Bank of China will also exceed 120 billion yuan.
In terms of growth, the non-interest income of Industrial and Commercial Bank of China, China Construction Bank and Industrial Bank fell by more than 15%, Agricultural Bank of China decreased by 8.8%, Bank of Communications decreased by 9.3%, Minsheng Bank and Bank of Beijing grew relatively rapidly, Minsheng Bank increased by 9.6%, and Bank of Beijing increased by 10.4%.
Table 1: Non-interest income and changes of selected banks
Source: Wind
In terms of the proportion of non-interest income, Wind data shows that in 2023, there are five banks with non-interest income accounting for more than 30%, namely China Merchants Bank, Bank of Communications, Bank of Ningbo, Industrial Bank and China CITIC Bank. The non-interest income of China Construction Bank, Postal Savings Bank, Agricultural Bank of China and Shengjing Bank accounted for less than 20%.
Compared with 2022, the proportion of most banks also declined, with Shengjing Bank falling by 8.7 percentage points and Industrial Bank falling by 4.2 percentage points.
Table 2: Proportion and change of non-interest income of some banks
Source: Wind
There are many reasons for the decline in non-interest income of banks, and the decline in fee and commission income is an important factor.
Wind data shows that in terms of total amount, the net income of fees and commissions of Industrial and Commercial Bank of China and China Construction Bank exceeded 100 billion yuan, China Merchants Bank and Agricultural Bank of China exceeded 80 billion yuan, and Bank of China nearly 79 billion yuan. However, in terms of growth, most banks have declined. Among them, Shengjing Bank fell by 45%, Industrial Bank fell by 38%, Huishang Bank fell by 33%, and China Merchants Bank, China CITIC Bank and China Everbright Bank also fell by more than 10%.
Specifically, the pressure on consignment businesses such as funds and wealth management is more prominent. For example, Ping An Bank will achieve agency personal finance income of 948 million yuan in 2023, a year-on-year decrease of 5.7%. In 2023, China Merchants Bank will achieve an agency wealth management income of 5.424 billion yuan, a year-on-year decrease of 18.37%, an agency fund income of 5.179 billion yuan, a year-on-year decrease of 21.52%, and an agency trust plan income of 3.206 billion yuan, a year-on-year decrease of 19.43%.
Peng Jiawen, vice president and head of finance of China Merchants Bank, said at the annual report press conference that the banking industry faced greater pressure in terms of fees and commission income last year. There are three main influencing factors:
"On the one hand, the slowdown or decrease in business volume growth has brought about a decline in revenue, such as the decline in the total custody of equity products by 4.55%, which has led to a significant decline in related business revenue and dragged down the overall revenue. On the other hand, last year's capital market fluctuations caused the income of the entire equity product to decline, so we compressed the equity products with relatively high rates in the structure of the agency fund, and also shifted the non-cash products with relatively high rates to the cash products with relatively lower rates in the wealth management products, and the change in the overall product structure also led to a decline in income. In addition, the impact of a series of policies such as fee reductions and concessions, insurance and fund rate reforms have also affected the overall fee income. ”
Dong Ximiao, chief researcher of Zhaolian and part-time researcher of the Institute of Financial Research of Fudan University, also pointed out that since last year, affected by changes in the financial market, investors' risk appetite has declined, fund stock prices have fluctuated greatly, and wealth management products have also been unstable.
Table 3: Net income and changes in selected bank charges and commissions
Source: Wind
According to the data of the Annual Report on China's Banking Wealth Management Market (2023), as of the end of 2023, the scale of bank wealth management was about 26.80 trillion yuan, a decrease of about 3.07% from the beginning of the year, which is also the second consecutive year that the scale of bank wealth management market has declined, and in 2022, the scale of bank wealth management has decreased by 4.66% from the high point at the end of 2021.
At the same time, changes in business structure have further put pressure on wealth income. Customers' risk appetite has decreased, which in turn has led to the migration of their wealth management needs from products with high fees to products with low fees.
Some analysts pointed out that from the perspective of the structure of the entire market, although public funds will maintain a positive growth momentum in 2023, the largest increase comes from the bond base, and its product characteristics determine that the yield of bank agency related industries is not as high as that of equity products. The same is true for the bank wealth management market, which will enter a period of recovery in the second half of 2023, mainly due to the rebound in the scale of cash management products. According to public data, cash management wealth management will add 1.33 trillion yuan in only half a year in the second half of 2023, accounting for 91% of the increase in wealth management in the whole market.
Table 4: Balance and changes of wealth management products of some banks
Source: Wind
The industry generally believes that the development of mid-income business and the increase of non-interest income are still the inevitable choices for the development of banking business in a low-interest rate environment. With the recovery of the market environment, the contribution rate of the bank's mid-income business to revenue is also gradually increasing.
Zhou Maohua, a macro researcher at the Financial Market Department of Everbright Bank, pointed out that the mainland's economy has maintained a good recovery momentum, consumption has steadily recovered, corporate profits have improved, the economy has been improving for a long time, and institutions have actively transformed and developed, which have provided strong support for the recovery and development of institutional intermediary business.
The China Banking Association (CBA) released the Report on the Development of Intermediate Business in China's Banking Industry and Selected Innovation Cases (2023), pointing out that at present, banks are further focusing on the financial needs of customers such as asset management, consumption upgrading, and online payment to promote the high-quality development of intermediary business by increasing market expansion, product innovation, and leveraging financial technology.
The report points out that the current political and economic situation, financial regulatory trends and financial development trends faced by mainland commercial banks are undergoing sustained and profound changes, and that under the background that the mainland economy has entered a new stage of development and the economic prospects are long-term, the intermediary business of domestic commercial banks still has great potential for development and improvement in terms of total income and income structure, service scope and innovation ability, service charge concept, and the development and application of financial technology.
At the same time, banks are also actively deploying wealth management agency business. Zhu Keli, executive director of the China Information Association and founding president of the National Research Institute of New Economy, said that compared with before, the recent development of bank agency business has shown more emphasis on risk management, customer experience and product innovation.
Editor丨Qin Ting, Lan Yinfan
Preliminary trial丨Xu Lanying
Final Review丨Zhang Wei
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