Author | Zheng Li
Source | Unicorn Finance
Around 2010, when mobile phones entered the public eye with a new way of life, until 2013, when Yu Bao was born, the door of mutual finance technology was opened, and it also forced the reform of the financial field, and private capital became an important driving force for financial reform. Also in the same year, the China Banking Regulatory Commission (CBRC) issued a notice to support qualified private capital to set up private banks at their own risk. In 2014 and 2015, WeBank, which is backed by Tencent, and MYbank, which is backed by Alibaba, came into being with the help of Mutual Finance Technology.
As two giants of private banks, one focuses on consumer finance and the other focuses on small and micro finance, the gap in performance, customer acquisition ability and asset quality has gradually widened in recent years. What's the problem behind it?
1
How wide is the performance gap?
WeBank and MYbank, backed by two Internet giants, have comprehensively crushed other peers since their inception, and the sum of their assets is close to one trillion yuan, which is close to the total assets of the other 17 private banks.
Judging from the performance of the "boss" and "second" of private banks, WeBank and MYbank have maintained double-digit growth in revenue and net profit, although the net profit growth rate of the two banks has slowed down. But there is already a clear gap in performance.
In 2023, WeBank will achieve operating income of 39.361 billion yuan, a year-on-year increase of 11.3%; Net profit exceeded 10 billion yuan for the first time, reaching 10.8 billion yuan, a year-on-year increase of 21%, and the net profit growth rate in 2022 will be 29.8%.
Source: Annual Report
MYbank's operating income was 18.743 billion yuan, a year-on-year increase of 19.49%; The net profit was 4.2 billion yuan, a year-on-year increase of about 19%, and the growth rate in 2022 was 69.1%.
The performance comparison can intuitively feel that WeBank has raised the distance between WeBank and MYbank, even if the net profit of MYbank from 2021 to 2023 is combined, it is less than 10 billion yuan (9.833 billion yuan), and WeBank's earning power is self-evident.
Net interest income accounts for the majority of operating income. In 2023, WeBank's net interest income will be 30.162 billion yuan, a year-on-year increase of 20.79%, accounting for 76.59% of revenue; MYbank's revenue was 15.082 billion yuan, a year-on-year increase of 35.58%, accounting for more than 80% of revenue.
Why is there such a disparity between the performance of the two banks? The reason for this is inseparable from the differences in business structure, customer base and product innovation.
In terms of the number of users, WeBank will have 399 million individual effective customers at the end of 2023, an increase of about 37 million from the end of the previous year.
The number of customers of the "second" MYbank is relatively inferior. As of the end of 2023, MYbank has served a total of 53 million small and micro customers, an increase of 3 million from the previous year, and the average balance of credit customers is 72,000 yuan. Compared with WeBank, MYbank also needs to further strengthen its customer development and service capabilities.
Let's look at the business structure. At the beginning of its establishment, WeBank set its sights on retail finance. What has made WeBank the big brother of a private bank is naturally inseparable from the personal consumption loan product "Micro Loan".
After the 2014 Spring Festival red envelope war and the taxi-hailing software dispute, a large number of users have become the cornerstone of WeLoan. The following year, in April 2015, Ant Financial launched Huabei and Borrow, which gave birth to an unprecedented consumer finance market through the buy-first-pay-later credit method.
On May 15, 2015, WeLoan was officially used on the mobile phone QQ, mainly serving C-end individual users, and is a pure online personal microcredit revolving consumer loan product. After a period of low-key operation, the WeChat channel attracted many consumers to use, and in May 2016, the loan balance of WeLoan exceeded 17 billion yuan, and on the second anniversary, it exceeded 76 billion yuan.
Relying on the consumption boom of young people, as of the end of 2023, WeLoan has served more than 63 million borrowers, an increase of 3 million over 2022, and an average of 950,000 loans issued per day during the year, an increase of 50,000 loans from the previous year.
In terms of product innovation, WeBank has formed a product matrix to connect with different groups. In addition to micro loans, there are also micro business loans, micro car loans, and micro household loans. Among them, micro-business loans focus on supporting the capital needs of micro, small and medium-sized enterprises.
As of the end of 2023, the balance of loans to wholesale and retail, manufacturing, and construction industries accounted for more than 75%. Private enterprises account for nearly 100% of the micro-business loan customers, with an average credit of about 1.1 million yuan, an average loan of about 250,000 yuan, and 50% of the interest on a single loan within 1,000 yuan.
In recent years, we have established cooperative relations with nearly 20 new energy vehicle manufacturers, including Tesla, Ideal, NIO, AITO, smart and other brands, serving more than 90,000 customers during the year.
Micro Household Loan provides a personal business loan of up to 500,000 yuan for small and micro business customers in the stock of micro loans. By the end of 2023, the "Micro Household Loan" has served more than 330,000 small and micro natural person customers.
Source: Canned Gallery
Looking at MYbank, with the strategic adjustment of the "Ali system", MYbank has achieved a thorough change.
According to regulatory requirements, MYbank no longer operates consumer loan business, and all customers have become small and micro enterprises, self-employed individuals, operating farmers and other groups. In addition, in April 2022, MYbank announced that it would gradually suspend Alipay withdrawals or transfers to MYbank's Type II accounts. This means that the previous method of "borrowing" MYbank's bank card to achieve free cash withdrawal no longer exists.
The "report card" for 2023 has been announced, and although there is still a big gap with WeBank, MYbank doesn't seem to care much about it. Previously, Jin Xiaolong, chairman of the bank, told the "21st Century Business Herald" that MYbank has no short-term pursuit of profits, and profits are never in its KPIs. On the contrary, prudent and steady development is still the long-term business path of MYbank.
2
Consumer loans were weak, and deposits were under pressure
Founded in December 2014 and led by Tencent, WeBank is the first internet bank in China. WeBank uses Tencent's social attributes as the entrance to promote personal consumption loans.
In terms of loan balance, at the end of 2023, WeBank's loan balance reached 414.51 billion yuan, an increase of 77.51 billion yuan or 23% from the previous year. Among them, the balance of personal loans was 227.5 billion yuan, of which consumer loans accounted for the majority, and the balance of consumer loans was 214.643 billion yuan, a year-on-year increase of 22.46%, accounting for 51.78% of the total loan balance.
Source: Canned Gallery
From 2020 to 2022, WeBank's personal loan balances were 120.1 billion yuan, 159.3 billion yuan, and 188.6 billion yuan, accounting for 60.02%, 60.54%, and 55.89% of the total loan balance; Among them, the balance of personal consumption was 115.7 billion yuan, 144 billion yuan and 175.3 billion yuan respectively, accounting for 57.85%, 54.70% and 52.02% of the loan balance.
The trend of consumer loans supporting WeBank's asset market is obvious. However, in terms of the proportion of personal loan balances, there will be a downward trend from 2020 to 2023. WeBank, which previously focused on consumer loans, has also begun to lend to small and micro enterprises.
In 2023, WeBank's corporate loans increased by RMB40.314 billion from the end of the previous year to RMB182.37 billion, a year-on-year increase of 28.38%, and the proportion of corporate loans in the balance of loans increased from 42.15% in the previous year to 43.98% in 2023, while the proportion of corporate loans in 2021 was 37.19%.
Source: Annual Report
Since its launch in 2017, WeBank's main corporate loan products are micro-business loans, which have been launched in 2017 for small, medium and micro enterprises across the country through pure online methods. As of the end of December 2023, micro-industry loans have radiated to 30 regions, of which the business in Guangdong, Jiangsu, and Zhejiang accounts for a relatively large proportion.
Just half a year after the establishment of WeBank, MYbank also opened successfully. The major shareholder is Ant Group, holding 30% of the shares, and the second shareholder is Wanxiang Sannong Group Co., Ltd., holding 26.78% of the shares.
Source: Annual Report
MYbank uses Alibaba's e-commerce platform to issue credit loans with "small amounts and short terms" to small and micro customers who are usually unable to obtain loans through traditional financial channels.
As of the end of 2023, MYbank's total assets reached RMB452.1 billion, and the balance of loans amounted to RMB270.582 billion, an increase of 18.58% year-on-year. The balance of loans to small and micro enterprises was 193.253 billion yuan, accounting for 71.42% of the total loan balance. As for the personal consumption loan business, as early as 2022, the balance of MYbank's consumer loan has been reduced to zero, and the balance of its personal consumption loan in 2021 was 130 million yuan.
Personal consumption loans were cut, and MYbank began to get involved in rural finance, speeding up the provision of services for rural areas, rural areas, and rural areas. As of the end of 2023, MYbank's cumulative number of customers served in counties (including county towns and below) accounted for nearly half of the cumulative number of users of the bank. In 2023 alone, the bank will provide financial services to more than 10 million small and micro operators in counties and rural areas.
In terms of qualification quality, at the end of 2023, WeBank's non-performing loan balance was 6.04 billion yuan, an increase of 1.07 billion yuan from the end of the previous year. From the perspective of changes in the non-performing loan ratio, the bank's non-performing loan ratio has undergone a "qualitative change" in 2019, with the data rising from 0.51% to 1.24%, falling to 1.2% in 2020 and 2021, and rising to the highest level in the past five years in 2022, reaching 1.47%, and falling to 1.46% in 2023. The data shows that WeBank has played a positive role in controlling and reducing non-performing loans.
MYbank's NPL ratio has increased for two consecutive years, and from 2021 to 2023, the NPL ratio (based on the 30-day overdue ratio) is 1.53%, 1.94%, and 2.28% respectively.
Source: Canned Gallery
In the downward cycle of the banking industry, the rise of the "non-performing rate" is the norm, especially for private banks with consumer credit, small and micro finance and rural finance as their core business, the sinking of the customer base also determines that they will face higher risk control challenges.
In this regard, Jin Xiaolong disclosed in the financial report that the bank will take risk control as the core of its work in 2023, actively control the scale, improve the ability to identify risks, strictly identify non-performing loans, and increase collection efforts.
According to public information, in order to strengthen the disposal of non-performing assets, MYbank will transfer a total of 3 non-performing assets in Yindeng Center in 2023. Overall, 6.14 billion yuan of non-performing assets were transferred at a price of 589 million yuan. The original amount of the last non-performing asset package transferred in 2023 was 4.196 billion yuan, which was finally transferred to Shanghai International Trust Co., Ltd.
In April 2024, MYbank transferred another 359 million yuan of non-performing asset income rights at a price of 28 million yuan. From the perspective of the price of disposing of non-performing assets, the overall transfer price is less than 1% off.
The provision coverage ratio is an important indicator of a bank's ability to compensate for risk. The minimum provision coverage ratio for the banking sector is 150%. Both banks met regulatory requirements, but their provision coverage ratios were declining year-on-year.
From 2021 to 2023, WeBank's provision coverage ratios were 467.46%, 413.99%, and 352.64%, respectively, while MYbank's provision coverage ratios were 363.95%, 257.39%, and 199%, respectively. This means that the proportion of funds reserved by the two banks to cover potential loan losses is decreasing.
As we all know, private banks have launched innovative deposits in their wireless business outlets, and with the suspension of automatic transfer of smart deposits, private banks have begun to make efforts to deliver large-amount certificates of deposit.
Taking WeBank as an example, in the first year of its establishment, the bank absorbed 6.5 billion yuan of interbank liabilities and only 145 million yuan of deposits. In 2018, with the boom of smart deposits, the bank's deposits soared to 154.786 billion yuan, an increase of nearly 28 times in one year.
As of 2023, WeBank's total liabilities will be 489.357 billion yuan, and customer deposits will be 375.528 billion yuan, an increase of 18.617 billion yuan or 5.22% from the beginning of the year, while the proportion of absorbed deposits will decrease from 81.59% at the end of 2022 to 76.74%, a decrease of 4.85 percentage points in one year.
Source: Annual Report
It is understood that WeBank's large-amount certificate of deposit products have a minimum deposit of 200,000 yuan, and the annualized interest rates of 2-year and 3-year large-amount certificates of deposit are 2.1% and 2.5%. In the first half of 2023, the Financial Times reported that in an environment where bank deposit rates generally start with the word "2", the interest rate on large certificates of deposit of many private banks such as WeBank has been as high as 4%, which is in stark contrast to state-owned banks and joint-stock banks.
Industry experts on the "Financial Associated Press" analysis, the pricing of bank deposit products and their own deposit liability pressure, customer base, financing channels and operating capacity and other aspects of the difference is related, some banks still have the problem of difficulty in depositing, have to issue large certificates of deposit or raise the fixed deposit interest rate to actively attract savings, it is expected that the follow-up banks will continue to reduce the deposit interest rate to reduce the cost of debt.
3
Consignment business into the second growth curve?
When interest rates fall, large certificates of deposit no longer have much advantage in terms of price. As a result, the deposit side of private banks will continue to be under pressure, and where should we find a way out?
In the past two years, WeBank's other core business is the consignment business. Consignment business is the consignment of financial institutions' wealth management products.
In WeBank's annual report, the consignment business is expressed as "Wealth+". As of the end of 2023, WeBank's assets under management balance were 2.58 trillion yuan, an increase of 37% from the end of the previous year. Driven by the growth of the distribution business, WeBank Wealth+ has cooperated with 23 wealth management subsidiaries, 71 fund companies, 7 trusts and 11 insurance companies. The number of consignment products exceeded 4,900.
Source: WeBank APP
In terms of revenue generation, in 2023, WeBank's agency business fees alone will generate 11.49 billion yuan in revenue, an increase of 13.2% in a year. This part of the income accounts for 30% of the annual revenue.
Like WeBank, MYbank is also expanding its agency business. By the end of 2023, the balance of customer assets managed by MYbank exceeded 800 billion yuan, and the balance of wealth management products sold by MYbank exceeded 500 billion yuan.
As a private bank based on serving the private economy, small and micro enterprises and residents' consumption, it has encountered growing pains on the road of development, but in any case, whether it is an Internet bank or a commercial bank, it is an industry that needs awe and patience, and at present, the oldest private bank is not more than 10 years old.
In the era of low growth, a healthy, sustainable and steady development mode should be respected and cherished. As the giants of the two private banks, where will the business outlet blow next? Let's talk in the comment section.