On the evening of October 29th, the “Retail King” China Merchants Bank disclosed its third-quarter report for the year 2024. The bank’s key indicators such as revenue, net profit, non-interest income, and net interest margin all showed a decline for the first three quarters, while the total liabilities increased by 5.56% to 10 trillion yuan.
According to reports from Shanghai Securities News and Jiemian News, China Merchants Bank’s third-quarter report for 2024 revealed that from January to September 2024, the bank achieved operating income of 252.709 billion yuan, a year-on-year decrease of 2.91%; and a net profit attributable to shareholders of 113.184 billion yuan, a year-on-year decline of 0.62%.
In the first nine months of this year, China Merchants Bank recorded a net interest income of 157.298 billion yuan, a decrease of 3.07% year-on-year, accounting for 62.24% of the operating income; and a non-interest net income of 95.411 billion yuan, a decrease of 2.63% year-on-year, accounting for 37.76% of the operating income.
The bank explained in the report that the decrease in non-interest net income was mainly due to a combination of fee reductions on certain products and a weakened customer investment willingness affecting fee and commission income.
As a critical indicator, for the period of January to September this year, China Merchants Bank reported a net interest margin of 1.87% and a net interest yield of 1.99%, both decreasing by 20 basis points year-on-year.
The bank attributed the decline in net interest margin to factors such as the lowering of loan market quoted interest rates (LPR) and existing housing loan interest rates, combined with insufficient effective credit demand leading to a year-on-year decrease in new credit business yield, ultimately resulting in a decline in net interest yield. Additionally, the continued impact of factors like the marketization of deposit rates has led to a year-on-year decrease in the cost of interest-bearing liabilities, exerting a certain positive effect on the net interest yield.
At the end of the reporting period, China Merchants Bank’s provision coverage ratio was 432.15%, a decrease of 5.55 percentage points from the previous year-end; the loan provision ratio was 4.06%, down 0.08 percentage points from the previous year-end.
Regarding non-performing loans, by the end of September, China Merchants Bank’s non-performing loan balance stood at 63.557 billion yuan, an increase of 19.78 billion yuan from the previous year-end.
By the end of the reporting period, the total liabilities of China Merchants Bank amounted to 10,495.128 billion yuan, a 5.56% increase from the previous year-end.
China Merchants Bank is known as the bank that was among the first in China to focus on retail finance as its main development line, earning itself the title of the “Retail King” in the industry. During the 2023 performance presentation held in March, Wang Liang, the bank’s president, stated, “This year, following the Board’s tight budget requirements, we have reduced costs and expenses in various areas to enhance efficiency and promote revenue growth.”
Last year, China Merchants Bank saw its operating income shrink for the first time in 14 years. Compared to 2022, the bank’s operating growth for 2023 was -1.64. The last time China Merchants Bank recorded a decrease in operating income was in 2009 when the figure fell by 6.98% year-on-year.
It’s not just China Merchants Bank; among the 22 A-share listed banks that have already disclosed their 2023 annual reports, 13 major banks including ICBC, CCB, ABC, Ping An Bank, and CIB posted negative revenue growth; CIB, CEB, and Zhengzhou Bank even reported negative net profits.
The primary reason for the banks’ revenue decline is the decrease in net interest margin. Net interest margin, the ratio of a bank’s net interest income to its total interest-earning assets, is a crucial indicator of revenue growth for banks. Net interest income accounts for 70% to 80% or even higher of the revenue for major commercial banks in China.
According to data from the China Banking and Insurance Regulatory Commission, by the end of 2023, commercial banks’ net interest margin had declined to 1.69%. Prior to this, Li Yunze, the Director of the China Banking and Insurance Regulatory Commission, stated, “Currently, loan interest rates have dropped to historical lows, and the banks’ net interest margin has reached its lowest level in twenty years.”