Major Banks Post Broadly Mixed Financial Results With Overall Profits Declining(AI Translation)
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文｜财新周刊 武晓蒙 朱亮韬 范浅蝉
By Caixin Weekly’s Wu Xiaomeng, Zhu Liangtao, Fan Qianchan
“以量补价是懒路，以价补量是险路，只有量价平衡才是出路，不能以损害风险抵御能力来换取盈利数值的正增长。”中信银行（601998.SH/00998.HK）高管这样概括当下的经营之道。
"Increasing volume to make up for price is the easy way, increasing price to make up for volume is the risky way, only balancing both volume and price is the way out. One cannot sacrifice risk resistance capability for positive profit growth figures," summarized an executive from China CITIC Bank (601998.SH/00998.HK), describing the current business strategy.
2024年上半年，全球经济增长动能偏弱，中国经济缓慢复苏，需求仍待提振。银行业是实体经济的晴雨表，上半年多家头部大中型银行净利润同比下滑；房地产行业贷款不良率尚处高位，个贷风险凸显，多家银行个人住房贷款、信用卡、消费贷、经营贷不良率全线攀升。
In the first half of 2024, the global economic growth momentum remained weak while China's economy experienced a slow recovery, with demand still needing to be stimulated. The banking industry, considered a barometer of the real economy, saw net profits of several major mid-to-large banks decline year-on-year in the first half. The non-performing loan ratio in the real estate sector remained high, highlighting the risks in personal lending. Numerous banks reported rising non-performing loan ratios across personal housing loans, credit cards, consumer loans, and business loans.
截至2024年9月1日，工商银行（601398.SH/01398.HK）、农业银行（601288.SH/01288.HK）、建设银行（601939.SH/00939.HK）、中国银行（601988.SH/03988.HK）、交通银行（601328.SH/03328.HK）、邮储银行（601658.SH/01658.HK）六家国有大行，以及已上市的十家全国性股份行、多数城/农商行已披露中报，业绩分化明显。
As of September 1, 2024, six state-owned banks—Industrial and Commercial Bank of China (601398.SH/01398.HK), Agricultural Bank of China (601288.SH/01288.HK), China Construction Bank (601939.SH/00939.HK), Bank of China (601988.SH/03988.HK), Bank of Communications (601328.SH/03328.HK), and Postal Savings Bank of China (601658.SH/01658.HK)—along with ten listed national joint-stock commercial banks and the majority of city and rural commercial banks, have disclosed their interim reports. The performance differences are significant.
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- Major Chinese banks reported mixed results, with overall revenue and net profit declining, and significant variation in performance.
- Non-performing loan ratios in the real estate sector remained high, impacting personal and business lending.
- Despite revenue drops, some banks showed net profit growth by cutting costs and relying on non-interest income, particularly from bond market investments.
The banking industry is heavily influenced by economic conditions; balancing volume and price is crucial for sustainable growth [para. 1]. In 2024, global economic growth was sluggish, and China's economic recovery was slow, dampening banking profits. Major banks reported a decline in net profits year-on-year due to rising non-performing loan (NPL) ratios, especially in personal lending sectors like housing loans, credit cards, consumer, and business loans [para. 3].
Six major state-owned banks, including ICBC and ABC, showed an average revenue growth rate of -2.27% in the first half of 2024, starkly lower than the 2.26% average in the same period last year. Net profit also dropped on average by -1.01%. Among these, Agricultural Bank of China reported a net profit increase of 2%, while others saw significant declines [para. 6]. Ten listed national joint-stock banks experienced slightly better performance but still had an average revenue growth rate of -2.18% [para. 7]. For city and rural commercial banks, significant differences were observed, with some banks showing over 15% growth in net profit while others saw declines of over 15% [para. 8].
Bank revenue sources shifted as net interest income was weak whereas non-interest income, including robust gains from bond market investments, became a new revenue engine [para. 10]. Banks displayed cost-cutting measures to combat declining revenues, with institutions like ICBC and CCB reducing expenses significantly [para. 13][para. 14]. However, declining revenues led to increased cost-to-income ratios for some banks [para. 14].
Net interest margins (NIM) narrowed year-on-year for large and medium-sized banks, although positive signs of stabilization emerged in the second quarter of 2024. CMB reported the highest NIM of 2% among large and medium-sized banks, and CCB led among the Big Four banks with a 1.54% margin [para. 19]. Stabilization of NIM was also referenced by China Construction Bank’s adjustments in asset-liability structure [para. 21][para. 22]. Additionally, regulatory measures began to show effects in stabilizing NIM across the banking sector [para. 25].
Diversion of investments into bonds became necessary for some banks, especially when loan demand was low [para. 33][para. 34]. Bond investment surged significantly for banks like CMB, attributed mainly to increased gains from bond investments in a bull market [para. 39][para. 40]. Despite these gains, other non-interest income sources also experienced high growth due to valuation changes in bonds [para. 44].
Retail loan risks increased amid adverse economic conditions. Major banks experienced a rise in NPL ratios in personal loans while corporate loan NPL ratios generally declined [para. 54]. Joint-stock banks also faced increased risks in retail loans due to high resident leverage and declining incomes [para. 58][para. 59]. Special mention was made of the significant increase in risks associated with credit card loans [para. 63].
The real estate sector remained risk-laden with some banks seeing heightened NPL ratios in their real estate loan portfolios. Regulatory and market dynamics impacted these ratios variably across different banks [para. 71]. Risks associated with overcapacity in industries such as new energy vehicles and photovoltaics were highlighted due to recent defaults and strained capital chains [para. 76][para. 81].
Overall, many banks retained a cautious outlook on further revenue growth, emphasizing cost control, efficiency improvements, and prudent risk management. This was despite positive signals in stabilization from regulatory measures and financial restructuring efforts, focusing on high-value investments and strategic business optimizations.
- CITIC Bank
中信银行 - CITIC Bank's revenue growth in the first half of 2024 was positive, unlike some of its peers, but showed "revenue increase without profit increase." Additionally, its credit or asset impairment losses were significantly reduced by 23.8%, contributing to positive net profit growth despite revenue pressures. The bank emphasizes enhancing asset quality and risk management to improve profitability.
- Industrial and Commercial Bank of China
工商银行 - According to the article, Industrial and Commercial Bank of China (ICBC) reported a 6% decline in revenue for the first half of 2024. Its net profit decreased by over 1%. The bank's loan quality saw increased risks, with personal housing and credit card loans showing higher non-performing rates compared to the previous year. Additionally, ICBC announced a mid-year dividend plan totaling 511.09 billion yuan.
- Agricultural Bank of China
农业银行 - In the first half of 2024, Agricultural Bank of China (ABC) saw its net profit grow by 2% year-on-year, defying the trend of declining profits among major banks. However, ABC's personal consumption loan non-performing rate increased by 13 basis points to 1.17%. The bank achieved a net interest margin of 1.54%, leading among comparable major banks.
- China Construction Bank
建设银行 - China Construction Bank's revenue for the first half of 2024 declined by 3.57% year-on-year. Its net interest margin remained the highest among the four major banks at 1.54%. The bank has also been focused on lowering operating expenses, with a 1.6% reduction compared to the previous year, saving approximately 14.63 billion RMB in costs.
- Bank of China
中国银行 - In the first half of 2024, the Bank of China (601988.SH/03988.HK) witnessed a revenue decline. Its average revenue growth rate was -2.27%, with a noted -3.57% decline in revenue. Its net profit growth rate fell over 1%. Despite challenges, non-interest income contributed positively, primarily driven by strong bond market performance.
- Bank of Communications
交通银行 - Bank of Communications (601328.SH/03328.HK) reported a revenue decline of 3.5% YoY in H1 2024, with net profit also down over 1%. The bank's credit or asset impairment loss provisions dropped by 15.4%. Its credit card non-performing loan (NPL) ratio rose 40BP to 2.32%. The bank will distribute a mid-year dividend with a payout rate of 32.36%.
- Postal Savings Bank of China
邮储银行 - Postal Savings Bank of China (601658.SH/01658.HK) is one of the six large state-owned banks in China. In the first half of 2024, its personal small loan non-performing loan (NPL) ratio rose by 15 basis points to 1.88%. The bank has announced that it is currently in the process of devising a specific plan for mid-term dividends, intending to align with the practices of other large state-owned banks.
- Ping An Bank
平安银行 - Ping An Bank experienced a notable performance shift in the first half of 2024. It reported a 13% decline in revenue but achieved positive net profit growth, partly due to a 28.5% reduction in credit or asset impairment losses. The bank's fee and commission incomes dropped significantly, highlighting a heavy reliance on investment returns for overall profitability. Despite operational challenges, it participated in mid-year dividend distributions.
- China Everbright Bank
光大银行 - In the first half of 2024, China Everbright Bank (601818.SH/06818.HK) saw a significant revenue decline of 8.77% year-on-year. Despite this, their provisioning for credit or asset impairment losses decreased by 23.8%, contributing to a positive net profit growth.
- China Minsheng Bank
民生银行 - In the first half of 2024, Minsheng Bank's revenue decreased by 6.17% year-on-year. The net profit attributable to shareholders dropped by 5.48% compared to the same period last year. These results are part of a broader trend in the Chinese banking sector, where some banks have seen a decline in financial performance amid economic challenges.
- Zheshang Bank
浙商银行 - In the first half of 2024, Zheshang Bank's revenue showed positive growth, standing out among national joint-stock banks. Despite a general industry downturn, the bank reported a significant increase in non-interest income, primarily driven by a 76.95% rise in investment income. This performance highlights the bank's reliance on financial investments for revenue growth.
- Industrial Bank
兴业银行 - Industrial Bank's (兴业银行) revenue and net profit both grew in the first half of 2024. Heads of the bank predict revenue growth might peak early in the year, then decelerate due to LPR adjustments and bond market volatility. The bank is cautious with loan quality and risk management, particularly in the real estate sector, as market demand remains weak.
- Bohai Bank
渤海银行 - Bohai Bank's net profit dropped significantly by 9.8% year-on-year in the first half of 2024, placing it among the banks with the highest decline rates in the sector. The bank's performance reflects broader challenges faced by multiple banks amidst China's slow economic recovery and heightened personal loan risks.
- Bank of Hangzhou
杭州银行 - Bank of Hangzhou (600926.SH) saw a notable growth in its net profit, with a year-over-year increase exceeding 15% for the first half of 2024. This was in contrast to the wider banking sector, where many institutions reported declines in profits and challenges in loan portfolios.
- Qilu Bank
齐鲁银行 - According to the article, Qilu Bank (601665.SH) achieved a growth rate in core attributable net profit of over 15% for the first half of 2024. This indicates strong financial performance relative to other regional banks.
- Ruifeng Rural Commercial Bank
瑞丰农商行 - Ruifeng Rural Commercial Bank (601528.SH) achieved a growth rate above 15% in net profit attributable to its parent company during the first half of 2024. This indicates a significant performance improvement compared to other banks, despite the overall challenging economic environment and sectoral issues.
- Jiangsu Rural Commercial Bank
苏农银行 - The article does not provide specific details about Jiangsu Rural Commercial Bank. However, it mentions that various rural commercial banks have seen significant changes in their net profits, with some achieving over 15% growth while others have experienced declines.
- Changshu Rural Commercial Bank
常熟农商行 - Changshu Rural Commercial Bank (601128.SH) reported a more than 15% increase in net profit, among the better-performing city and rural commercial banks in the first half of 2024. This growth was fueled by high investment returns, with some banks in Jiangsu and Zhejiang regions experiencing significant returns from bond investments.
- Bank of Zhengzhou
郑州银行 - As of the first half of 2024, Bank of Zhengzhou experienced a decline in net profit exceeding 15%. Performance among city and rural commercial banks varied significantly, reflecting differences in local economic conditions and resources.
- Bank of Xiamen
厦门银行 - As of September 1, 2024, Xiamen Bank (601187.SH) has experienced a significant decline in net profit, dropping by over 15%. The exact reasons for this decrease were not detailed in the provided content, but the bank's performance reflects broader trends affecting regional banks amid a challenging economic environment.
- Zhangjiagang Rural Commercial Bank
张家港农商行 - The article mentions that Zhangjiagang Rural Commercial Bank (002839.SZ) saw significant growth in investment income, with an increase of 176% year-on-year for the first half of 2024. This performance contributed to the bank's overall positive financial results, driven by the bond market's performance.
- Huaxia Bank
华夏银行 - In the first half of 2024, Huaxia Bank (600015.SH) experienced a decline in revenue but managed to achieve positive growth in net profit by significantly reducing credit or asset impairment provisions, indicating a strategic shift towards risk management and cost efficiency.
- Bank of Shanghai
上海银行 - The article mentions that Bank of Shanghai (601229.SH) has indicated middle-term dividend plans, though specific details are pending. This move is in line with the trend of more frequent dividend distributions in the banking sector.
- Bank of Jiangsu
江苏银行 - The article does not mention specific details about Bank of Jiangsu.
- Bank of Lanzhou
兰州银行 - According to the article, Bank of Lanzhou (Lanzhou Bank) had plans for a mid-term dividend, though the specific details of the plan have not yet been determined or disclosed. The bank's mid-term dividend scheme is among several being considered, showing a trend among banks to distribute dividends more frequently.
- the first half of 2024：
- The global economic growth momentum remained weak, and China's economy experienced a slow recovery. The banking industry saw net profits of several major mid-to-large banks decline year-on-year, and the non-performing loan ratio in the real estate sector remained high.
- the first half of 2024：
- The six major banks reported an average year-on-year revenue growth rate of -2.27% and an average year-on-year growth rate of net profit attributable to shareholders of -1.01%.
- the first half of 2024：
- Reported revenue declines and positive growth in some banks such as China Zheshang Bank, China CITIC Bank, and Industrial Bank Co., Ltd.
- the first half of 2024：
- Numerous city and rural commercial banks reported significant individual differences in growth rates of net profit attributable to equity holders.
- end of June 2024：
- Interest rate on corporate deposits at Industrial Bank was 2.01%, a year-over-year decline of 25 basis points.
- end of August 2024：
- Foreign media reported that senior Chinese regulators are considering adjusting interest rates on existing housing loans and allowing 'mortgage transfers'.
- end of August 2024：
- Balance of personal housing loans stood at 37.79 trillion yuan, down approximately 380 billion yuan from 38.17 trillion yuan at the end of 2023.
- As of September 1, 2024：
- Six state-owned banks and ten listed national joint-stock commercial banks, along with the majority of city and rural commercial banks, disclosed their interim reports.
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