The third quarterly report of small and medium-sized banks shows that net profit and revenue have doubled, and the demand for capital replenishment is strong

With the completion of the third quarter performance reports of 41 A-share listed banks, the operation of small and medium-sized banks in the first three quarters has also surfaced. The third quarterly report shows that many small and medium-sized banks have achieved a "double rise" in net profit and operating income, and the net profit of many banks has maintained double-digit growth. At the same time, the risk management capabilities of small and medium-sized banks have been continuously improved, the risk resilience has been steadily enhanced, and most banks have achieved an increase in the provision coverage ratio while maintaining a decline in the non-performing loan ratio.

The good results of small and medium-sized banks are not easy to come by, but the risks and challenges behind the achievements cannot be ignored. "At present, the operation of small and medium-sized banks has shown more obvious differentiation. Most small and medium-sized banks have maintained a stable asset quality, but the follow-up operating pressure is still large. Dong Ximiao, chief researcher of CmLCC Finance, said in an interview with the Financial Times.

Steady progress in operating performance The trend of performance differentiation is obvious

The third quarterly report shows that the growth rate of operating income of small and medium-sized banks in the first three quarters of this year was stable, the net profit attributable to the shareholders of listed companies achieved rapid growth, and the operating performance maintained a stable and qualitative trend.

The rapid growth of operating income is a highlight of the performance of small and medium-sized banks in the first three quarters, and the revenue growth rate of many banks exceeded 20% year-on-year. In the first three quarters of this year, Bank of Ningbo's revenue increased the most year-on-year, at 28.48%; in addition, there were 4 listed city commercial banks with a revenue growth rate of more than 20%, namely Bank of Chengdu, Bank of Jiangsu, Qilu Bank and Bank of Nanjing, with revenue growth rates of 26.01%, 24.70%, 22.49% and 20.99% respectively.

From the perspective of net profit growth, many small and medium-sized banks have achieved double-digit net profit growth. In the first three quarters of this year, the net profit of Bank of Jiangsu increased the most year-on-year, at 30.51%; in addition to Bank of Jiangsu, there were 6 listed city commercial banks with a net profit increase of more than 20% in the first three quarters, namely Bank of Ningbo, Bank of Hangzhou, Bank of Nanjing, Bank of Chengdu, Bank of Xiamen and Bank of Qingdao, with net profit growth rates of 26.94%, 26.16%, 22.36%, 22.15%, 20.61% and 20.45% respectively.

It is worth noting that while small and medium-sized banks are operating well and steadily, the Matthew effect is becoming more and more prominent. Dong Ximiao said in an interview with the Financial Times: "The overall operation of small and medium-sized banks is better than expected, but the industry differentiation is more obvious, showing a situation where the strong are stronger and the weaker they are. ”

The Financial Times reporter found through combing the three quarterly reports of small and medium-sized banks that in the first three quarters of this year, the revenue of 16 banks increased by more than 10% year-on-year, and the revenue of 7 banks declined year-on-year; from the perspective of pre-provision profits, the pre-provision profits of 7 banks increased by more than 20% year-on-year, the pre-provision profits of 19 banks increased by more than 10% year-on-year, and the pre-provision profits of 10 banks fell year-on-year.

Continuous optimization of asset quality The subsequent pressure is worth paying attention to

As of the third quarter of this year, most small and medium-sized banks have achieved further improvement in the provision coverage ratio while maintaining a decline in the non-performing loan ratio.

The non-performing loan ratio of 10 banks, including Bank of Ningbo, Changshu Bank, Bank of Hangzhou and Bank of Nanjing, is less than 1%; the provision coverage ratio of 9 banks such as Bank of Wuxi and Bank of Suzhou is higher than 400%; and some small and medium-sized banks have achieved a "double decline" in the balance of non-performing loans and the ratio of non-performing loans.

In the first three quarters of this year, Bank of Suzhou continued to optimize the overall loan quality and enhance its ability to compensate for risks through the implementation of comprehensive risk management and control. As of the end of the reporting period, the non-performing loan ratio of Bank of Suzhou fell from 1.38% at the beginning of the year to 1.17% in the third quarter, the lowest level since 2014.

The non-performing rate of small and medium-sized banks is affected by the local economic environment and industrial structure, the bank's own business philosophy and risk control level. "Under the dual impact of the impact of the epidemic and the downward pressure of the economy, the asset quality of small and medium-sized banks has remained basically stable, and the ratio of non-performing loans has been stable and declining, which is not easy." Dong Ximiao thinks.

However, some industry experts bluntly said that the follow-up pressure on the asset quality of small and medium-sized banks is still large. "The asset quality problems of small and medium-sized banks are usually delayed and cannot be taken lightly. At the same time, we see that in addition to the non-performing loan ratio and the balance of non-performing loans, the probability of risk of non-credit assets may be higher, and there is currently no complete and true statistics on this aspect. Dong Ximiao said.

In the face of subsequent asset quality pressure, Dong Ximiao suggested that, on the one hand, small and medium-sized banks should speed up the disposal of existing non-performing assets and strictly control the emergence of new non-performing assets; on the other hand, the regulatory authorities should also strive to broaden the channels for the disposal of non-performing assets of banks, especially small and medium-sized banks.

"Blood replenishment" is in high demand Tool innovation is key

Capital replenishment is an important means for banks to enhance their resilience to risks. This year's "Government Work Report" pointed out that it is necessary to continue to supplement the capital of small and medium-sized banks through multiple channels.

"Since the beginning of this year, bank credit has maintained a greater intensity, and capital consumption has increased. To this end, in addition to the replenishment of endogenous capital, listed banks actively use various capital instruments such as equity allotment, convertible bonds, perpetual bonds, and secondary capital bonds to supplement foreign capital; at the same time, they have reduced the pressure of capital consumption by increasing the development of capital-light business and optimizing the credit delivery structure. As of the end of September, the core Tier 1 capital adequacy ratio, Tier 1 capital adequacy ratio and capital adequacy ratio of listed banks were 11.02%, 12.67% and 15.52% respectively. Wang Yifeng, chief analyst of the financial industry at everbright Securities Research Institute, told the Financial Times reporter.

Industry experts also mentioned that compared with large and medium-sized banks, small and medium-sized banks are still trapped in the pressure of capital replenishment.

"At present, the channels for small and medium-sized banks to replenish capital are relatively narrow, and in general, it is necessary to further broaden the channels for capital replenishment of small and medium-sized banks and innovate tools." Dong Ximiao said.

In order to solve the above problems, Dong Ximiao believes that first of all, it is necessary for the state to adjust the original capital supplement tools of small and medium-sized banks, and at the same time, innovate capital supplementary tools and support the issuance of new capital instruments and secondary capital instruments. Secondly, small and medium-sized banks themselves must also change their concepts. For example, the proportion of dividends should be appropriately reduced, and the capital should be supplemented through profit retention, and the shareholders of small and medium-sized banks should fully understand this. Third, it is necessary to consolidate the foundation of development, promote transformation and development, develop more capital-light businesses, and reduce capital consumption.

Through mergers and reorganizations, small and medium-sized banks can also enhance their ability to hold together for warmth. A few days ago, Zhongyuan Bank issued an announcement that the bank will absorb and merge Luoyang Bank, Pingdingshan Bank and Jiaozuo China Travel Bank. If the merger is completed, the total assets of the new Zhongyuan Bank will reach nearly 1.25 trillion yuan, and it is expected to become the eighth largest city commercial bank in China.

"The fundamental purpose of the merger and reorganization of city commercial banks has changed." Dong Ximiao said that in the past few years, the merger and reorganization was mainly to become bigger and stronger, and now it is mainly to warm up the group and prevent and resolve risks.

This article originated from the Financial Times