Industrial Bank's performance indicators in the first quarter rebounded, and the pace of interest margin decline is expected to slow down

21st Century Business Herald reporter Zhou Miaomiao reported from Shenzhen

On the morning of April 26, Industrial Bank (601166. SH) held a briefing for its first quarter 2024 results.

According to the bank's management, the highlights of the first quarter of 2024 include: revenue increased by 4.22% year-on-year, new corporate loans of 217.145 billion yuan, exceeding the expected completion of the set target, deposit interest payment ratio decreased by 12BP year-on-year, net interest margin narrowed quarter-on-quarter and year-on-year decline, and other non-interest net income increased by 16.16% year-on-year.

Because its financial report data performed better in the industry, as of the close of the day, Industrial Bank (601166. SH) closed at 16.43 yuan, up 1.61%, and the bank's share price has risen 4.12% since April.

At this performance briefing, investors were more interested in the performance data of the bank's revenue, net profit, net interest margin, medium income business, non-performing assets and so on.

At the same time, investors are also paying more attention to topics such as the issue of "manual interest supplement", the progress of real estate risk clearance, and bond investment, which have been highly discussed in the industry recently.

In response to the performance and the above topics, the senior executives of IB responded at the meeting.

It is expected that the overall performance of other non-interest income will be stable for the full year

"Higher corporate loans and investment income were the two main drivers of revenue growth. Chen Xinjian, President of Industrial Bank, said at the meeting.

According to the data of the first quarterly report, the year-on-year growth rate of the bank's revenue turned from negative to positive, achieving operating income of 57.751 billion yuan, a year-on-year increase of 4.22%, and net profit attributable to the parent company decreased by 3.10% year-on-year, narrowing from the year-on-year decline of 15.61% at the end of 2023, reaching 24.336 billion yuan.

"The amount of new loans has achieved the set target. Lin Shu, general manager of the planning and finance department of Industrial Bank, said that according to the plan at the beginning of the year, the bank expects that the loan volume in the first quarter will account for 40% of the annual investment, that is, 190 billion yuan.

According to the data, the bank's corporate loans (excluding bills) increased by 217.145 billion yuan in the first quarter, completing the established plan; at the same time, the average interest rate of new loans was 4.10%, and the price continued to maintain a good level of joint-stock commercial banks.

"In the first quarter, IB was the beneficiary of the market interest rate trend. Lin Shu said. According to the data, the bank achieved other non-interest net income of 14.311 billion yuan, a year-on-year increase of 16.16%.

As for the growth of other non-interest net income, Lin Shu introduced that in addition to the strong traditional advantageous business of the interbank financial market sector, under the background of the downward trend of market interest rates, IB realized non-trading spread income of 4.138 billion yuan through reducing holdings, an increase of 2.426 billion yuan year-on-year.

Chen Xinjian, President of IB, said that thanks to the research of the Group's research companies on macro strategies and industries, especially the more accurate control of interest rate trends, IB seized more swing opportunities in the first quarter and brought good investment returns.

Based on the performance of the first quarter, investors are more concerned about whether the operating indicators will maintain rapid growth throughout the year. In this regard, the management of IB said that the goal of 2024 is to ensure that the revenue and profit are at a good level in the industry.

In the public sector, the bank will grasp the new opportunities arising from new trends such as new industrialization, large-scale equipment renovation and renovation, and trade-in of consumer goods, and explore new opportunities in the fields of new quality productivity.

In the field of investment, Lin Shu said that the current market interest rate and credit spreads have been at a historically low level, and the subsequent fluctuations of various market risk factors may have an impact on the growth rate of non-interest income.

The pace of spread decline is expected to slow gradually

The reporter learned that in addition to the growth of loans and investment income, the decline in debt costs is also one of the factors for the improvement of the bank's performance. According to the data, the bank's deposit interest payment rate fell by 12BP year-on-year to 2.12%, reaching the median level of joint-stock banks.

"In the past, some unreasonable agreement deposits matured, improving the debt structure, and the market interest rate pivot fell, which jointly led to a decline in the cost of debt. Chen Xinjian said.

Although the bank's return on assets fell by 12BP year-on-year in the first quarter due to factors such as the adjustment of the interest rate of the existing mortgage housing and the repricing of the LPR, the decline in the cost of debt caused the bank's net interest margin to narrow both quarter-on-quarter and year-on-year.

Against the backdrop of the continuous narrowing of interest margins across the banking sector, the bank's full-year net interest margin performance has also become the focus of investors' attention. Lin Shu said that if the LPR is not lowered, it is expected that the interest rate spread will continue to decline due to the continuous maturity and replacement of high-yield assets previously released, but the downward pace will gradually slow down.

Specifically, in terms of debt costs, he expects that deposit interest will not be further reduced in the near future, but there is still room for deposit costs to decline throughout the year.

The reason why the deposit rate will not be lowered in the near future is that the deposit rate has been reduced three times in a row in the second half of 2023, and the last cut was in December 2023, which is a relatively strong adjustment.

"Subsequently, the Bank will continue to monitor the trend of interest margins throughout the year in accordance with the annual plan to ensure the successful completion of the control target. Lin Shu said.

At the same time, in the near future, the banking industry is carrying out self-examination and rectification of the phenomenon of "manual interest payment on deposits" in accordance with the requirements of the self-discipline mechanism. Regarding the impact of the "standardized rectification of deposit interest supplement", Lin Shu responded that this will effectively standardize the competition order of the deposit market, consolidate the implementation effect of the market-oriented adjustment of deposit interest rates, and is conducive to the decline of deposit costs in the whole industry, and is expected to be more helpful to joint-stock banks.

It is reported that at present, the upper limit of time deposits of all tranches of joint-stock banks has a pricing advantage of 10-20 bps compared with large state-owned banks, and this part of the pricing advantage is conducive to the expansion of large-scale customer funds with reasonable pricing, further stabilizing the scale of deposits and optimizing the cost of deposits.

Risks in the real estate sector are generally controllable

As one of the earliest joint-stock banks, IB relied on real estate business to drive the increase of assets for a certain period of time, such as residential mortgage loans as the starting point for retail business, and real estate loans and trust beneficiary rights for the corporate side.

In recent years, with the amplification of risks in the real estate industry, the transformation process of IB has been further accelerated.

Investors who have been following IB for a long time will find that "balance sheet restructuring" is a high-frequency word that has appeared in the bank's performance reports or press conferences in recent years.

Behind the strategies of "Five New Tracks", "Region + Industry" and "Three Business Cards" is the working idea of IB to transform from the old triangular cycle of "real estate-infrastructure-finance" to the new triangular cycle of "technology-industry-finance".

Through the transformation of development strategy, the bank's "balance sheet reconstruction" continued to advance. At the Q1 press conference, many investors were curious about the traditional real estate-related business.

In this regard, Chen Xinjian, President of Industrial Bank, said at the meeting that the risks in the real estate sector are generally controllable.

According to reports, at present, the bank's real estate structure layout is generally reasonable, with the region concentrated in first-tier cities, and the structure is basically housing financing.

Lai Furong, general manager of the risk management department of IB, also revealed at the meeting that at the end of the first quarter, the non-performing asset ratio of public real estate, including credit and non-credit, was 3.16 percent, an increase of 0.12 percentage points from the beginning of the year.

Regarding the increase in non-performing assets, Lai Furong introduced that the risk management and control situation of real estate business is still relatively severe due to factors such as weak expectations in the real estate market and continuous exposure of real estate risks since the beginning of the year.

It is reported that at present, the bank's impairment provision ratio for public real estate assets is more than 4.5%, and the overall provision is relatively sufficient.

In terms of risk mitigation, he said that in the past two years, IB has achieved certain results in risk mitigation by applying the real estate risk mitigation policy tools issued by the central and local governments, combined with its own real estate "three classifications" risk mitigation strategy and agile team working mechanism. This year, we will continue to dispose of the risk of digesting stocks.

In terms of managing and controlling emerging risks, Lai Furong said that IB is highly concerned about the impact of the decline in housing prices on the quality of relevant assets, and has repeatedly assessed the risk level of real estate collateral in the whole bank through stress tests and collateral revaluation. At present, the overall mortgage ratio is still at a relatively low level, and the margin of safety of the mortgage ratio is high.

In addition, for the projects under the real estate financing coordination mechanism, he said that the bank has reviewed the push projects in accordance with the principles of marketization and commercialization, and made credit decisions independently, and has approved a total of 36.4 billion yuan of projects and invested nearly 10 billion yuan, and the overall operational risk is controllable.

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