As the third echelon of the banking industry, the huge group of urban commercial banks closely related to the urban and regional economy has always been a non-negligible existence in the banking industry.
The 2023 Central Financial Work Conference proposed to shift small and medium-sized financial institutions from quantitative expansion to qualitative and effective improvement, and clarified their deployment of "carrying out characteristic operations based on local areas". As of the end of 2023, there are more than 100 urban commercial banks in China, accounting for more than one-tenth of the domestic banking industry's asset share.
In the environment of "turmoil" of multiple factors such as stricter supervision and economic downturn, what is the current situation of the development of urban commercial banks? An in-depth study conducted by the Southern Weekend New Finance Research Center on a sample of 103 urban commercial banks with relatively complete data disclosure found that compared with the rapid growth in the past 10 years, the growth rate of total assets and liabilities of urban commercial banks has shown signs of slowing down. At the same time, in terms of operating income, net profit and net interest margin and other indicators, many urban commercial banks with business scope concentrated in the Yangtze River Delta region ranked high, becoming "top students" in this group.
The industry has shrunk its balance sheet, and 12 companies have assets exceeding one trillion yuan
In the economic downturn, some banks may actively choose to shrink the growth rate of assets and liabilities (referred to as "balance sheet reduction"), with the aim of achieving high-quality development that is more in line with their actual situation by controlling the scale. According to a survey conducted by the New Finance Research Center of Southern Weekly, in 2023, the assets and liabilities of urban commercial banks will show signs of "shrinking their balance sheets".
According to a series of data released by the State Administration of Financial Supervision and Administration, the assets and liabilities of city commercial banks will increase by about 10% year-on-year in 2023. Both growth rates were lower than the growth rate of the banking sector in the same period (about 11%); From a longitudinal point of view, the growth rate of assets and liabilities of urban commercial banks in 2023 will also be lower than the corresponding value in 2022, but still higher than the level from 2019 to 2021. In contrast, in 2023, the growth rate of assets and liabilities of large commercial banks (13.5%) will be significantly higher than the industry level.
However, "shrinking the balance sheet" is not a unanimous choice for all city commercial banks. In 2023, the number of urban commercial banks with assets exceeding one trillion yuan will increase from 10 in the previous year to 12.
Bank of Beijing, Bank of Jiangsu and Bank of Shanghai have assets of more than 3 trillion yuan, ranking among the top three urban commercial banks. Bank of Chengdu and Bank of Changsha have also entered the trillion club for the first time. However, Ningbo Donghai Bank, the smallest in terms of assets, has only 13.9 billion yuan. The difference in asset scale between the top and last echelons of city commercial banks is nearly 100 times.
The asset growth rate of four city commercial banks, including Bank of Chengdu, Bank of Ningbo, Bank of Jiangsu and Huishang Bank, exceeded 14%, which was higher than the average growth rate of banking assets (11.1%) in the same period. In other words, while the overall scale of urban commercial banks is showing a trend of "shrinking their balance sheets", some members are also "expanding their balance sheets" to a considerable extent.
The parallel situation of "shrinking the balance sheet" and "expanding the balance sheet" shows the current situation of the industry development in a specific period. A banking veteran told the Southern Weekly New Finance Research Center that during the economic upcycle, the expansion of asset scale is almost a unified action of all banks. In today's downturn, banks will adopt different strategies based on their own circumstances out of prudent management. Some banks with better financial positions and high levels of risk control are likely to maintain a steady expansion step. On the other hand, some banks that are not optimistic may adopt relatively low-key shock therapy out of survival needs.
According to a survey conducted by the Southern Weekly New Finance Research Center at the same time, in April 2024, Bank of Jinzhou, which has been listed in Hong Kong for eight years, will be officially delisted, becoming the first mainland bank to be delisted. Liaoning Financial Holding Group Co., Ltd. has acquired 99.93% of the bank's H shares of Bank of Jinzhou. According to the disclosed data, in the first half of 2022, Bank of Jinzhou's operating income and net profit decreased significantly, and the non-performing loan ratio at the end of the period rose to nearly 3%.
According to the New Finance Research Center of Southern Weekly, the delisting of Bank of Jinzhou not only reflects the current situation of the industry's cramped survival, but also means that the banking industry will face a more brutal competition pattern in the era of low profits. In the future, with the tightening of the regulatory environment, some small and medium-sized banks that are not operating well will face restructuring. How to find the best hitting point in business expansion and risk prevention and control tests the level of practitioners.
A number of indicators are leading, and the Yangtze River Delta frequently appears "top students"
From the perspective of external factors, the fate of city commercial banks seems to be inextricably linked with the regional economy and industrial chain.
Based on the geographical boundaries of different urban agglomerations, the Southern Weekend New Finance Research Center ranked the relevant indicators of more than 100 urban commercial banks that have disclosed information, and found that the urban commercial banks in the Yangtze River Delta region performed well in multiple indicators such as total assets, operating income and net profit.
Among the top 15 urban commercial banks in terms of total assets, there are 5 urban commercial banks located in the Yangtze River Delta urban agglomeration, namely Bank of Jiangsu, Bank of Shanghai, Bank of Ningbo, Bank of Nanjing and Bank of Hangzhou, whose total assets account for nearly half of the total assets of the top 15 urban commercial banks, crushing the southwest, central, Beijing-Tianjin-Hebei and the Greater Bay Area.
In terms of revenue and net profit attributable to the parent company, the same calculation base for the top 15 urban commercial banks, the proportion of urban commercial banks in the Yangtze River Delta region is 54% and 63% respectively, which is in sharp contrast with the other four regions. In terms of the ranking of the two indicators, Bank of Jiangsu, Bank of Beijing and Bank of Ningbo all ranked in the top three, and their performance was outstanding among the city commercial banks.
And the good business performance of these city commercial banks does not come at the cost of blind expansion.
According to the observation of two indicators of risk control prudence, such as the non-performing loan ratio and the provision coverage ratio, the New Finance Research Center of Southern Weekend found that among the top 15 urban commercial banks with non-performing loan ratios, there are 8 urban commercial banks located in the Yangtze River Delta region, and they rank high among the banks, with non-performing loan ratios of less than 1%. In terms of the ranking of the provision coverage ratio, the urban commercial banks in the Yangtze River Delta region also show a calm trend of "having food in hand and not panicking in the heart". Five city commercial banks, including Jiaxing Bank, Bank of Hangzhou, Bank of Suzhou, Bank of Ningbo and Bank of Huzhou, all have provision coverage ratios of more than 500%. As an operating buffer, the high provision coverage ratio is also regarded by the industry as the "home" for aggressive expansion.
In view of the above comparison results, a senior person in the banking industry believes that the good business performance of urban commercial banks in the Yangtze River Delta is not unrelated to the distribution of regional economy and industrial chain. The GDP of the Yangtze River Delta urban agglomeration represented by Jiangsu, Zhejiang and Shanghai has always performed well, which means that its economic activities are abundant. At the same time, there are many small, medium and micro enterprises in Jiangsu and Zhejiang, corresponding to the banking system, and the demand for inclusive and consumer finance is strong. From a pricing point of view, the yields of these two businesses have certain advantages, which can generally increase the net interest margin of banks, thereby forming a positive support for revenue and net profit.
The conclusion of the Southern Weekend New Finance Research Center, which uses net interest margin as an indicator, also supports this view. The ranking results show that among the top 15 urban commercial banks in this indicator, 4 are located in the Yangtze River Delta region. Among them, the first place is Zheshang Tailong Commercial Bank, which has the strategy of "serving small and micro enterprises and practicing inclusiveness", with a net interest margin of 3.7%; Jiangsu Changjiang Commercial Bank and Taizhou Bank, known as the "king of small and micro enterprises", were 2.91% and 2.89% respectively. Their net interest margins are much higher than the average of the banking sector for the same period (1.69%) announced by the State Administration of Financial Supervision and Administration and the average of listed urban rural commercial banks in 2023 (1.77%) measured by PwC.
Except for the Yangtze River Delta, how are the commercial banks in other regions performing?
The Southern Weekly New Finance Research Center continues to find that banks in the Beijing-Tianjin-Hebei region are second only to the Yangtze River Delta region in terms of total assets and net profit attributable to the parent company. In terms of revenue ranking, urban commercial banks in the central region are second only to the Yangtze River Delta and higher than other regions. Corresponding to specific banks, Bank of Jiangsu, Bank of Shanghai, Bank of Nanjing, Bank of Chengdu, Bank of Suining, Bank of Changsha, Huishang Bank, Zhongyuan Bank and Bank of Beijing are the active factors that contribute to the relevant ranking under the regional heading.
The ROE of the three city commercial banks leads the industry, and the Bank of Chengdu has outstanding earning ability
Among the commercial banks in the city, which one has the most outstanding earning ability?
The Southern Weekend New Financial Center analyzed the comparable items based on the return on equity (ROE) and concluded that among the more than 100 city commercial banks that have disclosed data, in 2023, the ROE of Suining Bank, Bank of Chengdu and Zhejiang Tailong Commercial Bank will all exceed 18%. Considering the closer correlation between ROE and the capital market, after replacing the comparable item with A-share listed city commercial banks, it is found that the ROE value of Bank of Chengdu ranks first among the 17 listed city commercial banks.
A similar conclusion can be drawn by extending the timeline: from 2020 to 2023, the ROE value of Bank of Chengdu is significantly higher than the industry average. In addition, according to the bank's self-statement in the annual report that "the weighted average return on equity is 18.78%, ranking among the best listed banks for four consecutive years", based on the above two judgments, in terms of earning power, the business model of Bank of Chengdu in recent years does have reference significance.
According to the data of Bank of Chengdu's annual report, the New Finance Research Center of Southern Weekend found that in 2023, the bank's net interest income and investment income in non-interest income contributed more to the bank's revenue increment. In general, non-interest income, which is mainly based on net interest income, fee commission income and investment income, is the main source of revenue and profit for banks.
According to the above clues, in 2023, the net interest margin of Bank of Chengdu will be 1.81%, down from the previous year, but better than the industry average of 1.69%. Under the general trend of narrowing net interest margin in the industry, Bank of Chengdu is not immune, but it has made the corresponding indicators higher than the peer level by optimizing the cost and income of assets and liabilities.
Bank of Chengdu's investment income also increased by more than 20%. This reflects the bank's ability to capture investment opportunities in the financial markets and compensate for the loss of non-interest income due to the decrease in fee income.
In terms of business strategy, the scale of deposits and loans of Chengdu banks has expanded rapidly in recent years. In 2023, the scale of deposits and loans will increase by about 20% and 30% respectively from the previous year, which is much higher than the average level of 11% in the banking industry. At the same time, the bank maintained a relatively good non-performing loan ratio (0.68%) and a high provision coverage ratio (504%). Between risk control and expansion, Bank of Chengdu seems to have achieved a reasonable balance.
The advantages brought by the location advantage should not be ignored. Bank of Chengdu mentioned in its annual report that the advantages brought by the regional environment have enabled it to have rich customer resources and broad development prospects. According to the annual report, the bank's local revenue in Chengdu accounts for more than 80% of the total revenue. In addition, the bank's implementation of the big retail strategy has led to a steady increase in the contribution of this business.
To sum up, "risk control in place + scale effect + retail strategic transformation" is the way for Bank of Chengdu to make money. In terms of external factors, Chengdu's location advantages as a core city of Chengdu and Chongqing have also provided a lot of help for its development.
According to the New Finance Research Center of Southern Weekend, at a time when competition in the domestic banking industry is becoming increasingly fierce, the high-quality development of small and medium-sized banks is facing multiple pressures such as economic uncertainty, financial market volatility, regulatory policy adjustment, and digital transformation pressure. City commercial banks can start to improve from the following aspects: first, clarify the strategic layout of serving the local area and form a differentiated competition pattern; secondly, adjust the asset-liability structure and expand the proportion of non-interest income; The third is to deepen the field of inclusive finance, and support the development of small and micro enterprises and private enterprises by strengthening close cooperation with the real economy; Fourth, pay attention to the quality of its own development and strengthen the construction of a digital risk control system. At the same time, it will optimize products and services to improve the level of financial technology application.
Chen Yan, researcher of the New Finance Research Center of Southern Weekly, Jin Yahan, and Xie Yu, assistant researchers
Editor-in-charge: Fengyu