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Text |WeMoney Research Laboratory.Recently, the State Administration of Financial Supervision and Administration released the regulatory indicators of China's banking industry in the fourth quarter of 2023, and the data shows that commercial banks will achieve a net profit of 24 trillion yuan, a year-on-year growth rate of 32%, down 2 from the growth rate in 20222 percentage points. The decline in earnings growth was affected by various factors such as net interest margin and intermediate business income.
As one of the important indicators to measure the profitability of commercial banks, net interest margin is still declining in 2023, with net interest margin in the fourth quarter falling by 4 basis points quarter-on-quarter to 1.69%, down below 17%, down 22bp from the same period in 2022 and 4bp from the third quarter.
In 2023, the total asset balance of commercial banks will be 3548 trillion yuan, a year-on-year growth rate of 110%, an increase of 02 percentage points, the overall asset scale is actively expanding. In 2023, the balance of non-performing loans of commercial banks will be 32 trillion yuan, an increase of 242.7 billion yuan from the end of 2022; The non-performing loan ratio is 159%, down 004 percentage points, the non-performing loan ratio improved slightly.
Judging from the data, 2023 is a difficult year for commercial banks, and Dong Ximiao, chief researcher of Zhaolian, told WeMoney Research Office that it is expected that the net interest margin of banks will decline further in 2024, and bank profits and revenues may be directly affected.
In 2023, the profit growth rate of commercial banks will decline due to the drag of interest rate spreads, and the cumulative net profit of commercial banks in 2023 will be 24 trillion yuan, a year-on-year increase of 32%, an increase of 2 from the same period last year2 percentage points. The average return on capital is 893%, down 0. from the end of the previous quarter52 percentage points. The average return on assets is 07%, down 0. from the end of the previous quarter04 percentage points.
The performance of different types of banks has been differentiated, and the year-on-year growth rate of net profit of large state-owned banks, urban commercial banks, and rural commercial banks has rebounded. 8%；Joint-stock banks fell by 37%。
It is worth noting that the large year-on-year change in the net profit growth rate of city commercial banks is mainly due to the low base in 2022.
Net interest margins are a significant drag. In addition, the continued pressure on middle income against the backdrop of a downturn in capital markets is also one of the reasons for the slowdown in earnings growth.
In 2023, the net interest margin of commercial banks will decline by 22bp year-on-year, and the year-on-year decline has expanded for two consecutive quarters; Month-on-month, it decreased by 33bp。In terms of sub-institutions, the net interest margin of city commercial banks and foreign banks was 157%, and the net interest margin of large commercial banks was 162%, and the net interest margin of joint-stock banks was 175%, and the net interest margin of rural commercial banks and private banks reached respectively. 39%。On a month-on-month basis, except for the increase in net interest margins of private banks and rural commercial banks, the rest of the commercial banks all had varying degrees**.
According to a number of analysts, the decline in net interest margin of commercial banks in 2023 is mainly caused by factors such as the reduction of interest rates on existing housing loans and the repricing of loans.
As you can see from the chart below, the largest quarter-on-quarter decline in net interest margin in the fourth quarter was seen by joint-stock banks, followed by large state-owned banks. It is worth noting that the net interest margin disclosed by the central bank in the regulatory indicators is not the net interest margin of the fourth quarter of the single quarter, but the average net interest margin of the previous four quarters. According to industry analysts, in addition to the impact of the reduction of existing mortgages, the cost of debt has also led to an unexpected decline in net interest margin.
At present, the overall net interest margin of large state-owned banks and city commercial banks has fallen below 17%, the decline in net interest margin may force some banks to reduce the scale of lending, slow down the expansion or carry out financing and stock expansion, the bank differentiation is more obvious, and assets will be concentrated in large banks. Judging from the data, especially the city commercial banks, the total assets in the fourth quarter of 2023 fell by 07 percentage points.
Dong Ximiao said that at present, under the condition of promoting the steady and moderate decline of social financing costs, commercial banks need to continue to gradually reduce debt costs, and the interest rate spread of commercial banks has dropped to 1 in the fourth quarter of 202469%, the first time below 170%, if this year continues to reduce fees and concessions to the real economy, the pressure on bank interest margins to narrow will increase, and it is urgent to reduce the cost of debt, so it is possible to reduce deposit rates.
Against this backdrop, private banks' net interest margins "bucked the trend"**
In the fourth quarter of 2023, the net interest margin of private banks was 439%, compared to the first quarter of 2023**028 percentage points. An industry insider told the WeMoney Research Office that private bank customers are relatively sinking, and customer qualifications are relatively average, so interest margins are relatively higher. At the same time, the size of private banks is small, and the net interest margin is greatly affected by the top private banks, in fact, the private banks at the bottom of the ranking are still under certain operating pressure. There is some uncertainty about whether the net interest margin of private banks can continue to expand. In 2024, the net interest margin of private banks may fall under the condition that the banking industry increases fee reductions and concessions to the real economy.
Private banks are limited by the restrictions of "one bank and one store" and weak brand effect, and high interest margins have always been their operating characteristics, and the advantage of net interest margin is one of the reasons why private banks can still maintain high deposit interest rates. On the one hand, it is in a weak position to attract deposits, and to absorb customer deposits, it is necessary to pay a higher price than other banks. On the other hand, in order to achieve differentiated competition, some private banks need to find customers that cannot be covered by traditional commercial banks, and this part of the customer group has increased the bargaining space.
However, judging from the published data, some private banks are facing certain pressure in terms of collecting depositsAccording to the 2022 annual report, 7 of the 19 private banks have slowed down the growth rate of their deposits, and 5 private banks, including Huarui Bank, Yealink Bank, U-Ming Bank, Sanxiang Bank and Zhenxing Bank, have seen negative growth in their deposit scale.
According to the official websites of private banks, the interest rate of lump sum deposit is significantly higher than that of large banks, and the interest rate of demand deposit of many private banks is higher than 02%, and the 3-year deposit interest rate of many private banks remains above 3%. Recently, some private banks are also adjusting deposit interest rates. On February 28, Wuhan Zhongbang Bank announced that according to the market-oriented demand of interest rates, Zhongbang Bank will reduce the three-year and five-year fixed deposit interest rates from 0:00 on March 1, 2024, and the three-year fixed deposit interest rate will be lowered to 275%, the five-year fixed deposit rate was lowered to 295%！
An employee of a financial institution said that in the context of the market-oriented reform of deposit interest rates, the central bank has established a market-oriented adjustment mechanism for deposit interest rates, and commercial banks can adjust deposit interest rates relatively flexibly. Different banks may have different business development positioning, asset-liability structure, marketing strategies, etc., and the pace and intensity of deposit interest rate adjustment may be different.
Industry insiders believe that private banks should gradually weaken the mode of collecting savings with high interest rates, improve the ability to acquire customers in scenarios through scientific and technological means, achieve refined and differentiated development, and continuously improve their sustainable development capabilities based on long-term prudent operation.