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In recent years, the net interest margin of commercial banks has continued to decline and is now at an all-time low.
A few days ago, data from the State Financial Supervision and Administration Bureau showed that the net interest margin of commercial banks in the fourth quarter of 2023 decreased by 4 basis points from the previous quarter and is currently at 169%, which is also the lowest value in 14 years.
Industry insiders believe that the level of net interest margin will directly affect the net profit of banks. If the net interest margin of commercial banks is too low, it will compress the profits of banks and affect the sustainable and healthy operation of banks, especially small and medium-sized banks.
Net interest margin is the ratio of a bank's net interest income (interest income minus interest) to total interest-bearing assets. As an important indicator to measure the profitability of commercial banks, it has attracted much attention. From the perspective of bank income structure, net interest income, as the revenue embodiment of the bank's main deposit and loan business, accounts for about 70%-80%.
Talking about the main reason for the narrowing of net interest margin, experts said that it was mainly due to the adjustment of the interest rate of the existing mortgage and the decline in the loan interest rate.
At the end of the third quarter of last year, the adjustment of the interest rate of the stock of the first home loan was implemented, and the absolute scale of the housing loans of large state-owned banks and joint-stock commercial banks was relatively large, accounting for a relatively high proportion, which was greatly affected, which was a major reason for the large month-on-month decline in their net interest margin. Lou Feipeng, a researcher at the Postal Savings Bank of China, pointed out.
According to the analysis of Everbright**'s financial industry research team, first, the impact of the reduction in the interest rate of the existing first home loan appeared in the fourth quarter; Second, in December last year, the interest rate of new public loans and personal housing loans fell much higher than the decline of LPR, while some existing loans still faced greater rolling repricing pressure; Third, in the process of urban investment bonds, the banking system may face a centralized "interest rate reduction and extension" arrangement, which may have a partial impact in the fourth quarter of last year.
However, despite the current net interest margin falling below 17%。Dong Ximiao, chief researcher of Zhaolian and part-time researcher of the Institute of Financial Research of Fudan University, said 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.
Caixin data.
Zeng Gang, director of the Shanghai Finance and Development Laboratory, also analyzed that in the first half of 2024, the net interest margin of the banking industry may still decline slightly. Zeng Gang 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.
Zeng Gang further said that in the long run, with the stabilization of market expectations and the recovery of effective credit demand, it cannot be ruled out that the interest rate spread of the banking industry will bottom out in 2024.
Where is the boundary of net interest margin decline? Is there a "warning value"?
"If you take into account the asset growth rate of 7%-8%, the dividend ratio of about 30% and the stable capital adequacy ratio of China's banking industry, the minimum net interest margin is about 1."6%-1.8% between. "In fact, the net interest margin of Chinese commercial banks has been below 1 for several consecutive quarters8% prudential value.
According to the Implementation Measures for Qualified Prudential Assessment (2023 Revision), the net interest margin is less than 18% of banks will be deducted points in the assessment: 08% (inclusive) to 1The 8% score ranges from 60 points (inclusive) to 100 points; 0.Less than 8% is scored as 0 points.
Given that the current net interest margin is already 169%, and there is not much room for it to fall.
As of 2023, the total assets of China's urban commercial banks and rural financial institutions account for more than 30% of the total assets of commercial banks. It can be said that small and medium-sized banks such as urban commercial banks and rural commercial banks, as an important part of China's banking industry, play a huge role in serving the real economy, especially in meeting the financing needs of the "three rural" and small and micro enterprises.
However, the profitability of small and medium-sized banks is uncertain. The data shows that from 2020 to 2022, the net profit of China's commercial banks will grow by an average of 4 per year9%, while the average annual growth rate of net profit of urban commercial banks is only 06%, and the net profit of rural commercial banks was -31%, which is very weak. In recent years, in the context of the accelerated expansion of large banks' assets, the growth potential of small and medium-sized banks' assets is insufficient, and the pressure on future business development may be further intensified.
A bank's profitability is mainly determined by three aspects: volume (the size of interest-bearing assets, i.e., whether the loan can be lent), price (net interest margin) and credit cost (asset quality), and profitability (return on equity, ROE) mainly depends on interest margin and credit cost. Liao Zhiming, chief analyst of China Merchants ** banking industry, said that due to the obvious decline in interest rate spreads and high credit costs, the profitability of small and medium-sized banks has weakened and the pressure on profitability has increased.
Since the profitability of small and medium-sized banks is dominated by net interest income, profitability is more likely to be affected by the narrowing of interest margins, and the narrowing of interest margins of small and medium-sized banks has been large in recent years.
After the Spring Festival holiday, a number of small and medium-sized banks announced adjustments to the listed interest rates of RMB deposits. The overall downward revision is 60-70 basis points. Some small and medium-sized banks said that the recent reduction is mainly a follow-up to the interest rate adjustment of large state-owned banks at the end of last year.
Ming Ming, chief economist of CITIC, said that the reason why some banks have delayed the time point is mainly due to the fact that the current pressure on small and medium-sized banks to collect deposits is greater, and it is a "good start", so small and medium-sized banks will first increase their efforts to absorb deposits, and then follow the adjustment of deposit interest rates after the year.
The net interest margin varies between different types of commercial banks. The net interest margins of large state-owned banks, city commercial banks and foreign banks were respectively. 57%, below average; The net interest margins of joint-stock commercial banks, private banks and rural commercial banks are respectively. 90%。
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Liao Zhiming said that small and medium-sized banks continue to face three major challenges: financial technology, risk management and wealth management due to the lack of scale effect and the general lack of differentiated competitiveness. Due to the small size, it is difficult for small and medium-sized banks to achieve large-scale investment in IT, which makes the IT system backward. In the era of mobile Internet and big data, the lag of financial technology will affect customer experience and risk management capabilities, resulting in the loss of young customers. In addition, small and medium-sized banks have a single business, and the wealth management business started late and made slow progress. Under the general trend of the inflow of personal financial assets into asset management products other than deposits, small and medium-sized banks with weak wealth management capabilities will face great challenges in the long-term development.
Dong Ximiao said that the pressure on small and medium-sized banks to replenish their capital is also greater. At present, the main pressure on the capital adequacy ratio of banks is that the growth of banks' net profits is slow, the ability of endogenous capital replenishment is declining, and it is necessary to rely more on exogenous capital replenishment, but the current capital market situation is under pressure, resulting in a certain pressure on exogenous capital replenishment.
Looking ahead, how can small and medium-sized banks get out of the predicament?
A number of experts said that small and medium-sized banks should make efforts from both the ends of liabilities and assets to squeeze pricing, in addition, they should also develop intermediate business, make good use of the advantages of their own deposit and loan customers, and change the single profit model.
Du Yang, a researcher at the Bank of China Research Institute, said that under the downward trend of net interest margin, small and medium-sized banks can respond from the following aspects:The first is to optimize the debt structure. By adjusting the deposit structure and increasing the proportion of core deposits, we will reduce the cost of debt; The second is to increase financial technology innovation. Including the use of financial technology means, the development of online business, the optimization of offline services, the improvement of financial service efficiency, etc., in order to reduce operating costs. Accelerate the development of differentiated financial products to meet the needs of different customer groups and enhance the competitiveness of banks; The third is to strengthen the pricing power of the asset side. Specifically, it is to optimize the investment direction of loans, pay attention to small and medium-sized enterprises, inclusive finance and other areas of the real economy, and ensure the long-term sustainability of income levels. At the same time, we should prudently carry out high-risk business to ensure the quality of assets. In addition, small and medium-sized banks can also cooperate with other financial institutions and Internet companies to broaden their business areas and achieve complementary advantages.
Wang Jian, an analyst in the financial industry at Guosen, believes that on the liability side, small and medium-sized banks should control the cost of debt, pay special attention to avoid the vicious competition of high-interest deposits, strictly control the cost of deposits, and reduce deposit interest rates by shortening the deposit period and regulating the scale of structural deposits. On the asset side, small and medium-sized banks should improve their asset operation capabilities and improve the efficiency of capital utilization, especially strengthen their risk pricing capabilities, strengthen the inspection of customers' repayment ability and track their repayment status, and reduce the non-performing rate as much as possible. (This article was first published in Ti **app, written by Yan Fanyao, edited by Liu Yangxue).
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