Recently, numerous listed companies in China have begun to release their financial reports for the third quarter of the year. Among the 16 A-share listed city commercial banks that have disclosed their results, 10 banks have reported a decline in personal loan balances.
Notably, Xi’an Bank experienced a dramatic decrease of 31.74% in its personal loan scale, making it the only institution among the 16 to surpass a 30% drop. Industry experts have pointed out that with a decreasing demand for personal loans in the market, a contraction in bank personal loan balances has become a norm, which in turn has put pressure on both non-interest income and net interest income for these banks.
According to a report from the Beijing Business Journal dated November 2, 17 city commercial banks that are publicly traded have issued their financial statements for the third quarter. However, due to Changsha Bank not presenting any updated data in its report, only the disclosed personal loan balance figures from the other 16 banks were taken into account. The data indicates that 10 of these banks experienced a decline in personal loan balances, representing a concerning 62%.
Specifically, as of the end of the third quarter, Xi’an Bank’s personal loan balance has decreased by 31.74% compared to the same period last year, marking a significant downturn. Other banks also facing declines include Lanzhou Bank and Chongqing Bank, which reported reductions of 11.89% and 11.69%, respectively. Meanwhile, Beijing Bank, Hangzhou Bank, Qilu Bank, Suzhou Bank, and Qingdao Bank saw declines ranging from 7% to 9%, while Jiangsu Bank and Zhengzhou Bank’s reductions were between 2% and 4%.
In contrast, a few banks have managed to sustain growth. Nanjing Bank, for example, reported a 3.05% increase in personal loan balances compared to the end of last year, making it the bank with the highest growth rate.
The report indicates that personal housing loans, consumer loans, and operating loans were once considered to be stable income sources, regarded as high-quality assets for risk diversification. However, residents have begun to adopt a more conservative outlook on future income, leading to an increase in proactive deleveraging and earlier repayment of housing loans. Concurrently, both consumption and investment willingness have declined, resulting in sluggish growth for both consumer loans and mortgage loans.
In response to this trend, analyst Liao Hekai from Jinle Input Analysis explained that the general cooling of personal loan balances among listed city commercial banks is primarily due to a cyclical peak in household leverage that is unlikely to improve in the short term.
Senior researcher Su Xiaorui from Suxi Research emphasized that the decline in personal loan balances across several listed city commercial banks is primarily attributed to a simultaneous weakening demand side along with active contraction on the supply side. On the demand side, residents are showing insufficient willingness to take on debt, adding pressure to mortgage lending. On the supply side, several banks are proactively adjusting their business structures and enhancing risk management, leading to a cumulative effect alongside reduced demand.
Some analysts believe that personal loans typically feature relatively high yields (with significant interest spread). The cooling of personal loans will subject the overall net interest margin (NIM) of city commercial banks to greater downward pressure, affecting both non-interest income and net interest income.
Looking ahead to the future trajectory of personal loans, Liao Hekai predicts that the pressure on consumer loans will persist, and the total balances are likely to stabilize at a low point. Mortgage-type operating loans are being hindered by property value assessments, while the credit-based operating loans are still in the process of clearing bad debts, indicating that they will remain under pressure in the short term, with personal loans unlikely to experience a V-shaped rebound in the near future.
Su Xiaorui anticipates that personal loan balances among city commercial banks may display a trend of divergence going forward. For institutions situated in economically vibrant areas with a high proportion of consumer loans, there is potential for the personal loan balances to halt their decline in the fourth quarter. Conversely, institutions located in weaker regions with larger risk exposures may continue to face ongoing pressure.