What you think is the bottom line (such as net interest margin, ROA) may not exist in the minds of regulators.
On February 21, 2024, the State Administration of Financial Supervision and Administration released the data on the main regulatory indicators of the banking and insurance industry in the fourth quarter of 2023. The specific interpretation is as follows
1) By the end of 2023, the total assets of large commercial banks, joint-stock banks, urban commercial banks, rural financial institutions and other types of financial institutions in local and foreign currencies were 178 trillion, 71 trillion, 55 trillion, 55 trillion and 60 trillion respectively, with year-on-year growth rates respectively. 20% and 539%, it can be seen that large commercial banks are ahead of other banking financial institutions in terms of growth rate. In fact, this is also the case in 2022, when large commercial banks started with 1290% of the total assets growth rate is ahead of other banking financial institutions.
2) This means that the market share of large commercial banks in the commercial banking system tends to rise, while the market share of joint-stock banks and other banking financial institutions, which have lagged behind in the growth rate of total assets for three consecutive years, tends to decline. In fact, in terms of the proportion of institutions in new RMB loans, new RMB loans have also been further concentrated in large Chinese banks in recent years. For example, since 2019, the proportion of large Chinese banks contributing to all new RMB loans has risen from less than 35% to more than 50% by the end of 2023 (an increase of 15 percentage points), while the proportion of small and medium-sized Chinese banks in all new RMB loans has correspondingly increased from 53 in 201874% to 38 at the end of 202373% (also down 15 percentage points).
3) The author believes that this change may not be a short-term phenomenon, but a trend. In other words, in the context of the structural reform of the financial supply side and the overall shortage of financing demand, the overall supply side of funds tends to be excessive, in this case, inefficient or ineffective capital supply (compared with the financing demand side) will become the object of elimination or replacement, and large state-owned banks will continue to make up for the narrowing interest rate spread space in the form of volume premium, and seize market share on this basis.
The reason for the previous "volume to make up price" of the large state-owned banks is that the profitability of mainland commercial banks is tending to decline, which can be seen from the indicators of net interest margin, ROA, net profit and so on.
In the fourth quarter of the year, the net interest margin of commercial banks narrowed by 4bp quarter-on-quarter and sharply narrowed by 22bp year-on-year to 169%, a new low since data became available. Among them, large commercial banks, joint-stock banks, urban commercial banks, rural commercial banks and foreign-funded banks narrowed by 276bp、22.6bp、9.7bp、19.8bp and 08bp to. 9% and 157%。Obviously, the national banks have narrowed the most, especially the large state-owned banks, which is probably the reason why they have more incentive to "make up the price with volume".
2. However, unlike other banks, the net interest margin of private banks has shown an overall expansion trend in recent years, and it will expand by 45 in 20231 bp to 439%, and the absolute net interest margin is also much higher than that of other banks. This may be related to the development of high-yield Internet loans, which is worth paying attention to.
3. Judging from the setting of indicators in the "Qualified Prudential Assessment Standards for Financial Institutions (2023 Edition)", the regulatory authorities have always had bottom-line requirements for commercial banks' ROA, net interest margin, cost-to-income ratio and other indicators, that is, ROA 050%, net interest margin 180% and 35% cost-to-income ratio. But judging from the actual situation, the decision-making department did not take the bottom line to heart, 16-1.A net interest margin of 7% may not be the bottom line, and commercial banks should get used to the low interest margin environment in the future, and take the initiative to adapt and respond.
In the year, the year-on-year growth rate of net profit of commercial banks fell to 324%, a significant decrease of 5 from the first three quarters of 202372 percentage points. Among them, the net profit growth rate of large commercial banks, joint-stock banks, urban commercial banks, private banks, rural commercial banks and foreign banks was respectively. 78% and -489%。
It can be seen that the net profit performance of joint-stock banks and foreign banks is the worst, with a certain degree of year-on-year decline, and the net profit level achieved by foreign banks in 2023 has not yet recovered to pre-epidemic levels. As a result, foreign banks seem to be the least optimistic compared to other types of banks.
2. If we only look at the data, in 2023, private banks, urban commercial banks and rural commercial banks will be ranked respectively. 79% vs. 1478% of the year-on-year net profit growth rate is ahead of other banks. However, if we measure the average annual growth rate of net profit since the epidemic, we will find that the net profit performance of urban commercial banks and rural commercial banks is also unsatisfactory.
This means that the net profit performance of urban commercial banks and rural commercial banks in 2023 may be related to a low base, while the conclusion that private banks perform relatively well can be confirmed.
3. Whether it is the growth rate of the current quarter or the cumulative growth rate, the data shows the characteristics of a significant increase in the fluctuation of net profit since the epidemic, which means that it has become more difficult for banks to balance performance growth since the epidemic, that is, it has been significantly more difficult in the past few years, and the space for banks to achieve specific profit target growth by manipulating various accounting subjects is shrinking.
In the fourth quarter of 2023, the return on assets of commercial banks fell to 07%, down 006 percentage points, a new low since the data began. Among them, the return on assets of large commercial banks, joint-stock banks, and private banks are respectively. 71% and 109%, while the return on assets of urban commercial banks, rural commercial banks and foreign banks fell respectively. 54% and 0A low level of 56%. Therefore, looking at the data alone, local banks and foreign banks are under the most pressure.
From the perspective of asset quality indicators, the change is not obvious, the non-performing loan ratio tends to decline overall, and the provision coverage ratio remains basically stable. However, there are certain differences in the performance of different banks, specifically: 1) the non-performing loan ratio of state-owned banks, joint-stock banks and urban commercial banks tends to decline, and the corresponding provision coverage ratio tends to increase; The non-performing loan ratios of private banks, rural commercial banks and foreign banks tend to rise, and the corresponding provision coverage ratios tend to decline, a diametrically opposed trend that may mean that some banks' asset quality indicators have been adjusted in their accounting accounts.
For example, unlike the non-performing loan ratio, the loan ratio of commercial banks has increased to a certain extent. For another example, in the fourth quarter of 2023, the overall provision coverage ratio of commercial banks declined, and the balance of loan loss reserves also decreased by 8635.6 billion yuan, and the balance of loan loss reserves in the fourth quarter of 2020 and 2022 also decreased by 11638.9 billion and 791 billion yuan. This means that 2023 will still be the year of eating surplus food.
2) However, in absolute terms, the asset quality and ability of urban commercial banks and rural commercial banks to resist risks are significantly weaker than those of other types of banks, especially rural commercial banks. Among them, the non-performing loan ratios of urban commercial banks and rural commercial banks were 175% and 334% and 194 provisions94% and 13437%。
1) Up to now, a total of 9 A-share listed banks have released their 2023 performance reports, including 2 joint-stock banks and 7 city commercial banks. Judging from the data alone, the performance indicators of China Merchants Bank and China CITIC Bank are not satisfactory, with a year-on-year decrease of 164% and 260%, and the revenue of Xiamen Bank in the city commercial banks also fell by 4 year-on-year84%；Although the growth rate of most of the remaining banks is above double digits, the year-on-year growth rate of revenue does not exceed double digits, further confirming the conclusion that the former cultural and creative profitability has declined.
2) Whether it is a scale indicator or a profit index, on the whole, the performance of five banks, including Bank of Hangzhou, Bank of Qingdao, Qilu Bank, Bank of Ningbo, and Bank of Changsha, is acceptable in 2023; In terms of asset quality indicators, the non-performing loan ratios of Bank of Ningbo, Bank of Hangzhou and Bank of Xiamen are much lower than those of other banks, but the provision coverage ratio of Bank of Ningbo has decreased significantly in 2023, and the provision coverage ratio of Bank of Hangzhou has also decreased slightly.