Under the macro background of China’s excellent economic growth last year, as the “leader” of Bank Of China Limited(601988) industry, the profitability of the four state-owned banks of industrial and agricultural China Construction ushered in a significant improvement.
Recently, Bank of China, China Construction Bank, Agricultural Bank of China and ICBC successively held 2021 performance conference. According to the annual report data released by the four major banks, the performance of operating benefits reflected by revenue and net profit exceeded expectations, especially the growth rate of net profit achieved the long lost double-digit growth. At the same time, the asset quality remained stable, and the business scale such as loan investment increased steadily.
Let’s first look at a set of profit data (according to Chinese accounting standards):
Industrial And Commercial Bank Of China Limited(601398) : in 2021, the operating revenue reached 942.76 billion yuan, an increase of 6.8% year-on-year; The net profit attributable to the parent company was 348.34 billion yuan, a year-on-year increase of 10.3%. At the end of 2021, the total assets exceeded 35 trillion yuan.
China Construction Bank Corporation(601939) : in 2021, the operating revenue was 824.25 billion yuan, an increase of 9.05% year-on-year; The net profit attributable to the parent company was 302.51 billion yuan, an increase of 11.6% year-on-year. At the end of 2021, the total assets exceeded 30 trillion yuan.
Agricultural Bank Of China Limited(601288) : in 2021, the operating revenue was 719.92 billion yuan, an increase of 9.4% year-on-year; The net profit attributable to the parent company was 241.18 billion yuan, an increase of 11.7% year-on-year. At the end of 2021, the total assets exceeded 29 trillion yuan.
Bank Of China Limited(601988) : in 2021, the operating revenue reached 605.56 billion yuan, an increase of 7.1% year-on-year; The net profit attributable to the parent company was 216.56 billion yuan, a year-on-year increase of 12.3%. At the end of 2021, the total assets exceeded 26 trillion yuan.
At the performance press conference of the four major banks, the management of the major banks rated the business performance achieved last year highly. ICBC said it “handed over a full-fledged answer sheet”, and ABC concluded that it was “relatively excellent financial performance”. However, in this year, the current economy is facing triple pressure. In order to boost steady economic growth, as the pacesetter of the Bank Of China Limited(601988) industry, the four major state-owned banks will further increase credit supply, especially for the loan supply in the first quarter, the “notice” of many major banks will change significantly.
In addition, the current market focus on real estate financial risks, this year’s credit delivery plan, and the narrowing trend of net interest margin are the focus of the four major banks’ response at the press conference.
many large banks expect the loan growth rate to be about 10% this year
China’s financing system is still dominated by indirect financing represented by bank credit. The scale and structure of credit supply reflect the financing needs of the real economy and affect the effectiveness of economic development. The credit supply of the four major banks is more representative and often plays the role of the main force of credit expansion in the pursuit of the goal of stable economic growth.
In 2021, a number of large banks reached new highs in credit extension:
The loan balance of Agricultural Bank of China increased by 2 trillion yuan over the end of last year, and the investment of new loans reached a record high;
ICBC’s domestic RMB loans increased by 2.12 trillion yuan, an increase of 243.3 billion yuan year-on-year, reaching a new high in the same period;
BOC’s domestic RMB loans increased by 1.38 trillion yuan over the beginning of the year, with an increase of a record high;
CCB’s loans increased by 2 trillion yuan over the end of last year, with a growth rate of 12%.
In 2022, facing the “triple pressure” of the economy, macro policies have repeatedly proposed to rely on the front force to stabilize the macro-economic market; Monetary and credit policies also make it clear that we should take the initiative to respond, maintain a moderate growth in new loans, vigorously support small, medium-sized and micro enterprises, and firmly support the development of the real economy. The four major banks said that they would further increase credit lending this year. Bank of China and Agricultural Bank of China both revealed that the loan growth rate this year is expected to be about 10%.
Liao Lin, President of ICBC, said that this year, ICBC placed its support for steady growth in a more prominent position. According to the overall idea of “working ahead, working together and accurately”, ICBC promoted the moderate growth of investment and financing in increment this year. Among them, in terms of forward force, adhere to the daily average of volume and increase year-on-year. According to the idea of increasing year-on-year, arrange the increase scale of the total amount of investment and financing in the whole year.
Zhang Xuguang, vice president of the Agricultural Bank of China, revealed that the Agricultural Bank of China continued to strengthen loan lending and help stabilize the macro-economic market. It is expected that the annual increase of RMB loan lending this year will be higher than last year’s level and the growth rate will be higher than 10%.
Wang Zhiheng, vice president of BOC, said that BoC will meet the requirements of building a new development pattern and continue to expand the scale of new loans this year. It is expected that domestic RMB loans will increase year-on-year, with an increase of no less than 10%.
In terms of the structure of credit granting this year, Ji Zhihong, vice president of CCB, said that CCB will continue to provide all-round financial support to Inclusive Finance, scientific and technological innovation, manufacturing, green development, Rural Revitalization and other fields; Accurately connect major national projects, provide credit in two new and one important areas, and support moderately advanced infrastructure investment.
it is worth noting that from a regional perspective, regions with slow credit growth in the past are expected to increase the inclination of credit resources this year. CCB said that it will moderately increase its support for credit extension in the central and western regions and Northeast China this year; ICBC also said that it should coordinate the credit supply in key strategic areas and areas with slow credit growth. For some provinces and cities with slow credit supply, we should focus on strategic resource allocation
In addition, BOC rarely disclosed the scale and structure of credit supply in the first two months of this year. Wang Zhiheng said that by the end of February 2022, the balance of RMB broad corporate loans in BOC had reached 7481.6 billion yuan, an increase of 368.9 billion yuan over the beginning of the year, an increase of 47.2 billion yuan year-on-year, an increase of 5.19% over the beginning of the year. By industry, corporate green loans increased by 8.6% over the beginning of the year, loans for strategic emerging industries increased by 11.6%, and medium and long-term loans for manufacturing increased by 6.9%. In terms of subregions, new loans in Beijing Tianjin Hebei, Yangtze River Delta, Dawan district and other regions account for more than 70%.
Bank of China President Liu Jin said that the first quarter is coming to an end, and we have been making active efforts to maintain the moderate growth of new loans. I believe you will see a satisfactory result in the first quarter report. In boosting steady economic growth, we hope to achieve steady growth in our assets, liabilities and financial benefits.
real estate bad “double rise”, and the risk is generally controllable
Real estate financial risk and its impact on the quality of bank assets are a hot spot in the current financial market. At this year’s performance conference, the four major banks responded to real estate risk exposure.
From the risk exposure of the real estate industry of the four major banks in 2021, the balance and ratio of non-performing loans in the real estate industry of the four major banks showed a “double rise” trend.
Zhang Wenwu, vice president of ICBC, said that in 2021, the non-performing loan rate of ICBC’s real estate industry increased periodically, which was mainly caused by the deterioration of loans of a few large risk households. ICBC’s real estate loans account for a relatively low proportion, which will not have a great impact on the asset quality of the whole bank. In addition, ICBC’s recognition standard for non-performing loans is more prudent, and the non-performing situation of real estate has been comprehensively and truly reflected; These risks are fully covered by the provision for loans and losses.
Cui Yong, vice president of Agricultural Bank of China, said that affected by the overall downturn of the real estate market and the risk exposure of individual real estate enterprises, the non-performing loans of real estate increased last year, but the overall risk is controllable. Since the fourth quarter of last year, the regulatory authorities have taken a number of measures to guide commercial banks to meet the reasonable financing needs of real estate. However, in the short term, the industry expectation is still being repaired, and the downward trend of market sales investment has not been reversed. The tension in the capital chain of real estate enterprises with high debt level in the early stage and difficult real estate enterprises has not been significantly alleviated. It is expected that these real estate enterprises will still face certain risk exposure pressure in the future. ABC’s loans to these enterprises account for a small proportion, most of which have collateral, and the credit risk is controllable.
Cheng Yuanguo, chief risk officer of CCB, said that in the process of accelerating the construction of a new development pattern, the risk release and clearing of local areas and individual customers are inevitable. At present, the real estate industry fluctuates, asset quality control faces certain pressure, and real estate is moving towards a virtuous circle and healthy development. The risk appearance of individual customers can not affect the stable and healthy development of the whole industry.
“From the situation of CCB, the asset quality of CCB’s real estate industry remains relatively stable in 2021, and the non-performing rate is lower than the domestic average non-performing rate to the public. At the same time, the total amount of loans to key real estate enterprises accounts for a relatively small proportion, and the impact on asset quality is generally controllable.” Cheng Yuanguo said.
For personal mortgage loans, the four major banks said that they would increase their support for residents’ needs for improvement this year. ABC said that under the condition of ensuring that the concentration meets the regulatory requirements, it will focus on supporting affordable rental housing and ordinary commodity housing livelihood projects for groups with just needs, and will realize the stable and orderly release of individual housing loans throughout the bank. CCB revealed that the demand for personal mortgage has picked up recently. At present, it will actively support the reasonable housing demand of residents’ families and help the healthy development of the real estate market.
this year’s net interest margin is expected to decline slightly
in recent years, with the promotion of interest rate marketization, the net interest margin of banks has gradually narrowed. Looking forward to this year, this trend is expected to continue
Zhang Min, vice president of CCB, said that the net interest margin of CCB was 2.13% in 2021, a year-on-year decrease of 6 basis points, and the management of net interest margin is facing great challenges and pressure.
“From the asset side, the interest rates of loans and bond investments have decreased. From the liability side, although the reform of deposit pricing self-discipline in June last year has effectively smoothed the premium level of deposit interest rates, the trend of regular and long-term deposits in the whole society has not changed. In this process, the competition in the deposit market is becoming increasingly fierce, and it is difficult to break the rigidity of deposit interest rates in the short term.” Zhang Min said.
Zhang Min said that the net interest margin of CCB has gradually stabilized in the second half of 2021, but since December last year, the LPR interest rate has been reduced. Considering the decline of new loan interest rate and the rigidity of deposit interest rate, it is expected that there will be some downward trend in the net interest margin this year, which is a problem faced by all banks
Zhang Yi, vice president of Agricultural Bank of China, said that it is predicted that the net interest margin of Agricultural Bank of China will decline slightly this year, but the whole trend is obviously stabilizing. From the asset side, it is expected that the interest rate of new loans will decline this year and the rate of return on investment will also decline; From the debt side, it is expected that the debt cost will remain relatively stable. The effect of the self-discipline reform of deposit pricing last year will continue to be reflected this year. After the two or three-year deposits of ABC expire this year, the pressure on the negative interest rate of deposits will be relieved; In addition, the inter-bank debt cost has a certain downward space, which will further alleviate the pressure on debt cost.
