Xingye Bank Corporation Limited (Xingye Bank) saw a 1.81% growth in operating income in the first three quarters of this year, but the net profit attributable to the parent company’s shareholders dropped by 3.02% compared to the same period last year. The bank attributed the profit decline to increased provision requirements.
According to a report by Caixin on November 1st, Xingye Bank’s third-quarter report for 2024 released on the evening of October 30th revealed that the bank achieved operating income of 164.217 billion yuan during the first three quarters of this year, a year-on-year increase of 1.81%, with the growth rate remaining largely in line with the first half of the year. The net profit attributable to the parent company’s shareholders was 63.006 billion yuan, showing a 3.02% decrease year-on-year, with a 10.45% quarterly decline in the third quarter.
At an earnings briefing held on October 31st, Xingye Bank’s President, Chen Xinjian, explained that the year-on-year increase in net profit attributable to the parent company’s shareholders shifted from a slight increase of 0.86% at the end of the first half of the year to a negative figure mainly due to the increased provision requirements.
Provision requirements refer to funds used to cover expected losses on loans (EL) (a portion of economic capital is used to offset unexpected losses, with the remaining capital used to maintain normal operations).
In China, banks typically make provisions equal to the estimated losses for each corporate loan item, while provisions for individual loans are calculated based on different weights determined by the Basel Capital Accord for loan classification levels.
Xingye Bank’s Chief Financial Officer, Lin Shu, stated, “Impairment losses increased, with an additional provision of 2.8 billion yuan in the third quarter alone, accumulating to 6 billion yuan year-on-year, a 14.31% increase.”
In detail, for the first three quarters of 2024, Xingye Bank achieved net interest income of 111.587 billion yuan, representing a 2.39% increase compared to the same period last year; the net interest margin was 1.84%, down by 10 basis points (BP) year-on-year. Lin Shu believes that the net interest margin may decline by 12BP in 2025, stating that “next year, the banking industry is expected to face pressure.”
Regarding asset quality, during the first three quarters, Xingye Bank provided for asset impairment losses totaling 47.703 billion yuan, a 14.31% year-on-year increase; the provision coverage ratio was 233.54%, a 4.33 percentage point decrease from the first half of the year.
As of the end of September, Xingye Bank’s non-performing loan balance was 62.118 billion yuan, an increase of 3.627 billion yuan from the previous year-end; the non-performing loan ratio was 1.08%, up by 0.01 percentage point from the previous year-end.
In terms of real estate, as of the end of September, Xingye Bank’s non-performing asset ratio for public real estate financing was 3.96%, up by 0.92 percentage points from the beginning of the year; the provisioning level for public real estate financing was 4.94%, exceeding twice the average provisioning ratio for public business.
Xingye Bank’s General Manager of Risk Management, Lai Furong, stated that while retail loan asset quality control is under some pressure, overall risks are expected to be manageable.
A user named v286Rv on Caixin’s website commented, “Being able to increase income in this market situation shows that this bank is too aggressive, with increasing risks.”
Public information indicates that Xingye Bank Corporation Limited was established on August 26, 1988. As of June 2024, its total assets amounted to 10.35 trillion yuan, making it one of the first joint-stock commercial banks in China, with its headquarters located in Fuzhou City, Fujian Province. The bank was officially listed on the Shanghai Stock Exchange on February 5, 2007, with a registered capital of 5 billion yuan.