What is the development trend of the banking industry in 2024?According to the State Administration of Financial Supervision and Administration, in the third quarter of 2023, the net interest margin of the banking industry decreased by 021 percentage points to 173%。As of the end of September 2023, the balance of non-performing loans of commercial banks increased by RMB241.7 billion from the end of 2022 to 322 trillion yuan; The non-performing loan ratio is 161%, down 0. from the end of 202202 percentage points, the decline has narrowed. The core Tier 1 capital adequacy ratio and capital adequacy ratio of commercial banks decreased by 0.0 respectively from the beginning of 202338 and 040 percentage points to 1036% and 1477%。
A number of experts told The Paper that although the net interest margin of the banking industry may still decline in 2024, as the market sentiment picks up, it is expected that the net interest margin of the banking industry will gradually stabilize as a whole, and the inflection point of bottoming out and rebounding cannot be ruled out. At the same time, the non-performing loan ratio will gradually stabilize. However, the demand for capital replenishment in the banking sector is likely to rise.
Net interest margins are likely to remain slightly lower
Zeng Gang, director of the Shanghai Finance and Development Laboratory, said that in the first half of 2024, the net interest margin of the banking industry may still decline slightly. He believes that in order to provide a better environment for the real economy to continue to recover, there is a need for moderate relaxation at the monetary policy level, and the requirements for RRR and interest rate cuts objectively exist. Combined with the impact of the reduction of the existing mortgage interest rate, the replacement of urban investment debt, the repricing of LPR (loan market ** interest rate), the regularization of deposits and the adjustment of loan structure, it is expected that the deposit and loan interest rates of the banking industry may decline in 2024, but in general, considering the industry differentiation and competition factors, the decline in deposit interest rates may be smaller than that of loans, and the net interest margin of the banking industry may still decline slightly in the first half of the year. In the long run, with market expectations stabilizing and effective credit demand picking up, it cannot be ruled out that the interest rate spread of the banking sector will bottom out in 2024.
Zhou Maohua, a macro researcher at the financial market department of Everbright Bank, said to The Paper that the net interest margin of the banking industry will further narrow in 2024, mainly due to the continuous concession of the real economy by the domestic banking industry and the sharp fluctuation of financial assets; Despite the structural reduction of deposit interest rates last year, the proportion of time deposits is still high. At the same time, the decline in the income of some banks' intermediary business also contributed to the drag.
However, Zhou Maohua believes that from the trend point of view, the economy is showing a good recovery trend, the demand for physical financing is gradually picking up, the market sentiment is picking up, residents' savings deposits are returning to normal, and the intermediate business is expected to follow the economic activities to resume growth, and the overall net interest margin of the banking industry is expected to gradually stabilize.
Dong Ximiao, chief researcher of Zhaolian and part-time researcher of the Institute of Financial Research of Fudan University, told The Paper that in the context of the banking industry's continuous concession of the real economy, the net interest margin of the banking industry may decline, but the decline may be reduced. Dong Ximiao believes that large commercial banks tend to assume more social responsibilities, so the pressure on interest rate spreads to narrow may be greater. In addition, due to the impact of local debt, the pressure on the narrowing of interest margins of some urban commercial banks may also be greater.
The non-performing loan ratio may be steadily declining
In terms of non-performing loan ratio, Zeng Gang believes that with the strengthening of macro policies and the intensive introduction of policies for some markets (especially the real estate market), the potential risks of urban investment bonds and real estate will be effectively alleviated. Although some risks still need time to be exposed and digested, from the perspective of the banking industry as a whole, it is expected that the overall non-performing rate will remain stable in 2024, the non-performing generation rate will remain stable, the overall risk of the banking industry is controllable, and the overall non-performing rate of some banks with good credit structure and adequate risk disposal may also decline steadily.
Zhou Maohua believes that under the circumstances of macroeconomic fluctuations, uneven economic recovery, and difficulties faced by enterprises in some industries, it is normal for some domestic banks to face operating and asset pressure. On the whole, China's economy has gradually shaken off the impact of the epidemic, the most difficult period for the economy has passed, consumption and domestic demand have shown a steady recovery trend, macro policy space is sufficient, and the economy has a lot of room for maneuver; At the same time, the banking sector is also continuing to deepen reform and continue to increase the disposal of non-performing assets. The recovery of economic vitality and the improvement of business conditions will be good for the operation and asset quality of the banking industry.
Zhou Maohua said that macroeconomic fluctuations, industry fluctuations, bank operating conditions, and asset expansion rates will all affect the bank's non-performing loan ratio. To reduce the non-performing loan ratio, banks need to continue to optimize their asset-liability structure, improve their operating capabilities, and broaden their efforts to dispose of non-performing assets.
Lou Feipeng, a researcher at the Postal Savings Bank of China, believes that the asset quality of the banking industry is under pressure, but with the continuous recovery of China's economy and the continuous prevention and resolution of financial risks in recent years, the overall risk has converged, and the non-performing loan ratio of the banking industry is likely to remain stable. In the current situation that is already low, the probability of continuing to decline significantly is also small. Small and micro enterprise risks, and some regional risks are worth paying attention to.
The need for capital replenishment has risen
In terms of capital adequacy ratio, Zeng Gang said that the demand for bank capital replenishment will rise. From a regulatory perspective, in November 2023, the State Administration of Financial Supervision and Administration officially issued the Measures for the Capital Management of Commercial Banks (hereinafter referred to as the "Capital Measures"), which will be officially implemented on January 1, 2024. The promulgation of the Capital Measures marks a new stage in the implementation of the new capital agreement in China's banking industry, and the preparation, implementation and application of the new capital regulatory system will be an important task for China's banking industry for a long time to come. In addition to the formal implementation of the Capital Measures, the four large state-owned banks are also facing the requirements of global systemically important banks to meet regulatory standards, and objectively have the need to issue loss and absorption vehicles (TLAC). From the perspective of the bank's own development, in order to further strengthen the support for the credit supply of the real economy, continuous capital replenishment is also indispensable, and it is expected that in 2024, the issuance of perpetual bonds, Tier 2 capital bonds and TLAC instruments (four large state-owned banks) of various banks will increase. Considering that the liquidity in the financial market is relatively abundant and there is a lack of high-quality assets, sufficient market demand can provide a relatively good market environment for the issuance of various capital instruments by banks.
Dong Ximiao said that the main pressure on the current capital adequacy ratio of banks is that the growth of bank net profit is slow, the ability to replenish endogenous capital is declining, and it is necessary to rely more on exogenous capital supplementation, but the current capital market situation is under pressure, resulting in a certain pressure on exogenous capital replenishment. In addition, small and medium-sized banks are also under greater pressure to replenish their capital.
Lou Feipeng believes that the capital adequacy ratio of the banking industry is under pressure, especially when the profit growth rate is low and the space for endogenous capital replenishment is shrinking, the pressure on capital replenishment is even greater. In this regard, on the one hand, banks can develop and save capital, and on the other hand, they can make good use of capital replenishment tools to enrich external financing.
*: The Paper.