As the highlight of the disclosure of the annual reports of listed companies, on April 29, the 2023 annual reports of 42 A-share listed banks were collected.
In the past year, 42 banks achieved a total net profit attributable to the parent company of more than 2.09 trillion yuan, of which 37 banks achieved an increase in net profit attributable to the parent company, and 14 banks achieved a "double-double" growth rate. However, behind the sparkling performance, the banking industry is in a state of challenges, with the situation of "increasing profits without increasing revenue", the narrowing of net interest margins, and the shrinkage of personal housing loan business all test the operation of banks.
The pressure of "increasing profits without increasing income" is highlighted
In the past year, 42 banks have achieved a total net profit attributable to the parent of more than 2.09 trillion yuan, 37 banks have achieved growth in net profit attributable to the parent company, and 14 banks have achieved double growth in net profit attributable to the parent company.
From the perspective of profit growth, local small and medium-sized banks are quite eye-catching, and Bank of Hangzhou ranks first in the growth rate of net profit attributable to the parent company, and the bank will achieve a net profit attributable to the parent company of 14.383 billion yuan in 2023, a year-on-year increase of 23.15%. Changshu Bank, Qilu Bank, Bank of Suzhou, Jiangyin Bank, Bank of Chengdu and Suzhou Rural Commercial Bank also performed well, with net profit attributable to the parent company increasing by 19.6%, 18.02%, 17.41%, 16.83%, 16.22% and 16.04% respectively year-on-year. Bank of Qingdao, Bank of Jiangsu, Ruifeng Rural Commercial Bank, Qingdao Rural Commercial Bank, Bank of Ningbo, and Shanghai Rural Commercial Bank will also have a year-on-year growth rate of more than 10% in net profit attributable to the parent company in 2023.
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At the same time, some banks' operating income is under pressure, resulting in the pressure of "increasing profits but not increasing income". A reporter from Beijing Business Daily combed and found that in 2023, more than 10 banks will "increase profits but not revenue".
Specifically, among the large state-owned banks, in 2023, the operating income of Industrial and Commercial Bank of China and China Construction Bank will decline by 3.73% and 1.79% year-on-year respectively, and the net profit attributable to the parent company will increase by 0.79% and 2.44% year-on-year respectively. Among the joint-stock banks, Ping An Bank, China CITIC Bank, China Merchants Bank, and Minsheng Bank also had a similar situation, among them, Ping An Bank achieved operating income of 164.699 billion yuan, a year-on-year decrease of 8.4%, and a net profit attributable to the parent company of 46.455 billion yuan, a year-on-year increase of 2.1%.
Among the local small and medium-sized banks, Bank of Shanghai, Chongqing Rural Commercial Bank, Zijin Rural Commercial Bank and Bank of Chongqing all achieved growth in net profit attributable to their parent companies, but their revenue decreased by 4.8%, 3.57%, 1.93% and 1.89% year-on-year respectively.
In addition, the revenue and net profit attributable to the parent company of Shanghai Pudong Development Bank, Bank of Zhengzhou, Industrial Bank, Everbright Bank and Bank of Guiyang showed a year-on-year decline.
In the view of Xue Hongyan, vice president of Xingtu Financial Research Institute, in 2023, banks' "increasing profits but not increasing revenue" will mainly stem from the stabilizer role of provision adjustment. Compared with the average annual growth rate of more than 10 points in the previous two years, some banks deliberately slowed down the pace of provisions last year.
In an interview with a reporter from Beijing Business Daily, Liao Hekai, an analyst of Jinle Function, analyzed that the main reason for some banks to "increase profits but not increase revenue" is mainly due to the continuous adjustment of business structure, focusing on strengthening risk control, opening up sources and reducing expenditures, strengthening operations and improving profit levels, and continuing to reduce the business direction of high risk and high returns.
In the first quarter of this year, the performance pressure of A-share listed banks is still significant, according to the observation of a reporter from Beijing Business Daily, although the net profit attributable to the parent of some banks has increased compared with the same period last year, the decline in revenue has been greater, and some banks have achieved a double increase in revenue and net profit attributable to the parent in 2023, but in the first quarter of this year, they have fallen into a situation of "increasing profits but not increasing income", and the net profit of many large and medium-sized banks has also shown negative growth.
More than ninety percent of banks' net interest margins have narrowed
Affected by factors such as the decline in market interest rates and the continuous concession of the real economy, the net interest margin (i.e. net interest yield) of A-share listed banks is facing severe challenges. Among the 42 banks, only the net interest margin of Bank of Qingdao rose, and the net interest margin of 41 banks declined.
As of the end of 2023, Bank of Qingdao's net interest margin was 1.83%, an increase of 0.07 percentage points from the previous year. The bank mentioned in the financial report that it was mainly due to the strict control of the cost rate of deposits and bonds payable, and the decrease in the cost ratio of interest-bearing liabilities, thereby hedging the impact of the decline in the return on assets and the growth of the scale of deposits, and achieving an increase in net interest margin.
As of the end of last year, the net interest margin indicators of the above seven banks decreased by 48 basis points, 37 basis points, 34 basis points, 31 basis points, 31 basis points, 31 basis points, 30 basis points, and 30 basis points respectively compared with the previous year.
As for the reasons for the large decline in net interest margin, Ping An Bank said that the net interest margin declined due to the continuous concession of the real economy, the adjustment of asset structure, and the impact of loan repricing effect and changes in market interest rates. Bank of Jiangsu mentioned that the decline in market interest rates and LPR (loan prime rate), coupled with the repricing effect after the decline in LPR since last year and the adjustment of interest rates on existing housing loans, put pressure on the yield of interest-bearing assets of commercial banks, and the net interest margin showed a narrowing trend.
Although the net interest margin of Changshu Rural Commercial Bank and Changsha Bank is at a high level among the listed banks, it has not been able to avoid the trend of narrowing net interest margin. As of the end of 2023, Changshu Rural Commercial Bank's net interest margin was 2.86%, down 16 basis points from the previous year. Changsha Bank's net interest margin was 2.31%, down 0.1 percentage points year-on-year, the bank said that the growth rate of net interest income was lower than the average daily growth rate of interest-bearing assets, and at the same time, affected by the LPR multiple cuts, the average interest rate of loans showed a downward trend, and the average interest rate of interest-bearing assets was under pressure, and the net interest margin narrowed year-on-year.
Dong Ximiao, chief researcher of Zhaolian, predicts that overall, banks will continue to cut deposit rates in 2024 to further reduce the cost of funds and ease the pressure of narrowing interest rate spreads. In addition to lowering deposit rates, banks should also reduce interest subsidies and fees on deposits other than interest to further reduce the hidden costs of deposits.
At the 2023 results conference and performance briefing, a number of bank management personnel also revealed the direction of the next step to stabilize interest margins. As Liu Jianjun, President of the Postal Savings Bank, said, on the liability side, we will consolidate the advantage of interest payment, further strengthen wealth management, and let customers retain more demand deposits through comprehensive AUM assessment, and try to increase the proportion of demand deposits, and also carry out certain control over medium and long-term deposits. Lin Shu, general manager of the Planning and Finance Department of IB, mentioned that the liability side has strengthened the control over the interest rate of deposits and loans, and adopted control measures for some high-cost liabilities to ensure a reasonable decline in deposits, and at the same time increased the proportion of low-cost settlement deposits.
Housing loans have shrunk by more than 500 billion yuan
With the fluctuation of the real estate market, the impact of prepayment and other factors, the personal housing loan business as the pillar of bank asset allocation in the past is facing the challenge of "shrinking". As of the end of 2023, the total amount of personal housing loans of the 41 A-share listed banks that disclosed relevant data was 34.37 trillion yuan, a year-on-year decrease of 544.258 billion yuan, or 1.56%.
Among the 41 listed banks, more than 60% of the housing loans have "shrunk". Although China Construction Bank topped the list of personal housing loans with 6.39 trillion yuan, it has decreased by 93.084 billion yuan compared with the end of 2022, while the personal housing loans of Industrial and Commercial Bank of China, Agricultural Bank of China, and Bank of China all decreased by more than 100 billion yuan from the same period last year to 6.29 trillion yuan, 5.17 trillion yuan, and 4.79 trillion yuan.
China Merchants Bank, Industrial Bank and China CITIC Bank ranked among the top three joint-stock banks in terms of housing loans, with a scale of more than one trillion yuan at the end of the reporting period. However, except for China CITIC Bank, the amount of personal housing loans of the other two banks shrank, with China Merchants Bank and Industrial Bank decreasing by 3.722 billion yuan and 21.409 billion yuan to 1.39 trillion yuan and 1.08 trillion yuan respectively.
In terms of urban and rural commercial banks, Bank of Beijing, Bank of Jiangsu and Bank of Shanghai are the urban commercial banks with relatively high housing loans, with 325.915 billion yuan, 244.71 billion yuan and 160.581 billion yuan respectively, all of which declined from the same period last year; Shanghai Rural Commercial Bank and Chongqing Rural Commercial Bank ranked first among rural commercial banks, but as of the end of the reporting period, they also decreased by more than 5 billion yuan to 101.936 billion yuan and 91.489 billion yuan.
The "shrinkage" of housing loans is mainly affected by factors such as the adjustment of the real estate market and the increase in prepayment. Xue Hongyan said that on the one hand, the demand for housing is weak, and the growth of new housing loans is slow, and on the other hand, there has been a wave of prepayment of existing housing loans, resulting in a shrinkage of the bank's personal housing loan balance.
According to data from the National Bureau of Statistics, the sales area of commercial housing in China will be 111735 million square meters in 2023, a decrease of 8.5% from the previous year. At the same time, the prepayment wave set off by borrowers has also led to a contraction in the scale of mortgages. For example, Shanghai Rural Commercial Bank mentioned in its annual report that the balance of the bank's real estate mortgage loans decreased slightly by 5.46% compared with the end of the previous year due to the prepayment of loans.
In response to changes in the real estate market, a number of banks have stepped up their support for the demand for rigid and improved housing. In 2023, ICBC issued nearly 300 billion yuan of second-hand housing loans, an increase of 9 percentage points over the previous year, Agricultural Bank of China invested 781 billion yuan in personal housing loans in 2023, 17.8 billion yuan more than the previous year, and Minsheng Bank invested 82.501 billion yuan in personal housing loans, an increase of 12.474 billion yuan year-on-year.
Looking forward to 2024, Li Yun, Vice President of CCB, said at the 2023 annual results meeting that the bank will continue to do a good job in housing mortgage financial services, especially in optimizing the online process of mortgage services, affordable housing personal loan services, and mortgage loan support for farmers' self-built houses in developed counties.
Retail transformation is moving forward against the headwinds
In recent years, retail transformation has become almost a consensus in the banking industry, and retail business plays a pivotal role in the strategies of many banks. However, the business has also been volatile.
In 2023, the retail share of many A-share listed banks will decline, and their contribution to profits will be less than expected. The pre-tax profit of ICBC's personal finance business was RMB150.474 billion, accounting for 35.7% of the pre-tax profit, while the total profit of CCB's personal finance business was RMB194.897 billion, accounting for 56.65% of the total profit to 50.05%.
The pre-tax profit of China Merchants Bank's retail finance business, which enjoys the reputation of "king of retail", in 2023 will be 99.913 billion yuan, accounting for 56.57% of the total pre-tax profit, down 0.47 percentage points year-on-year. Ping An Bank, the "dark horse of retail", also suffered a "Waterloo", with the total profit of the bank's retail finance business falling to 11.9% in the reporting period, compared with 43.6% in the same period last year. In recent years, China CITIC Bank, which has implemented the "new retail" strategy, has a pre-tax profit of 15.935 billion yuan from retail banking business, accounting for 23.7% of the total to 21.3%.
Against the backdrop of pressure on the profitability and growth of the retail business, many banks have focused on the focus of their business strategies and reformed their organizational structures. Among them, Ping An Bank's retail finance module changed in February this year, including but not limited to, the removal of the retail business management department in the original eastern, northern and southern regions, and the integration of the integrated financial service center into the comprehensive financial development department.
At the beginning of the year, China Merchants Bank, the "king of retail", set up a retail customer group department in the retail line of the head office, whose main responsibility is to serve various types of retail customers in addition to private banking customers, and at the same time, the responsibilities of the retail finance headquarters, wealth platform department and private banking department have been appropriately adjusted. Regarding the reason for this adjustment, Wang Liang, President and CEO of China Merchants Bank, said at the 2023 results conference that the current retail customer scale served by China Merchants Bank has reached 197 million customers, and the adjustment of the retail line structure is to strengthen the service capacity of the head office and implement the development strategy of retail banking.
In the face of the "headwinds" of retail transformation, banks are actively seeking to make up for the corporate position, with a view to exploring new profit growth points. Judging from the annual report, in 2023, many banks will increase their investment in manufacturing, green loans, inclusive small and micro enterprises and other fields, and the structure of corporate business will be significantly optimized.
"The pressure on the corporate business is in deposits, and the pressure on the retail business is in loans. Corporate and retail businesses need to help each other, and we hope that corporate business can go up and fight for respite for retail," said Ji Guangheng, President of Ping An Bank.
"In recent years, the growth rate of banks' retail business has slowed down, mainly due to macroeconomic fluctuations, and the demand for residential and business-related transactions and financial services has been suppressed. Zhou Maohua, an analyst at the financial market department of Everbright Bank, said that with the gradual recovery of the economy, the retail industry is expected to gradually improve.
Beijing Business Daily reporter Song Yitong Li Haiyan