On May 14th, a report released by Ernst & Young (EY), the multinational professional service firm headquartered in London, revealed that Chinese listed banks experienced negative growth in net interest income for the first time since 2017, with overall operating income also in the negative.
EY published the “Review and Outlook of Chinese Listed Banks in 2023” on the same day. This marks EY’s 17th research report on Chinese banks. The report analyzed the latest changes in the operating performance, asset quality, business development, and operating models of all 58 listed banks in both A-share and Hong Kong H-share markets in 2023.
According to the report, the net interest income of listed banks saw a negative growth for the first time since 2017, with an average net interest margin of 1.69% in 2023, a decrease of 25 basis points from 2022. Net interest margin has been declining for four consecutive years. Interest net income fell by 2.98% compared to 2022. Fee and commission income decreased by 8.05% year-on-year, marking the second consecutive year of negative growth. Over the past three years, the proportion of fee and commission net income of listed banks has been continuously decreasing, reaching 14.28%, 14.19%, and 13.18% from 2021 to 2023, with fee and commission net income in 2023 at 7734.06 billion yuan, a decrease of 8.05% year-on-year.
Due to the decline in net interest income and fee and commission net income, the operating income of listed banks totaled 5.869 trillion yuan in 2023, a decrease of 0.98% compared to the previous year. This marks the second consecutive year of negative growth, as the figure was -1.86% in 2022. Net profit was 2.169 trillion yuan, with a growth rate of 1.43%, down by 5.77 percentage points from 7.20% in 2022.
EY believes that compared to large banks, small and medium-sized banks in mainland China are more affected by macroeconomic changes, and they need to further solidify their development foundation and enhance resilience.
EY’s “Overview of the Performance of 42 A-share Listed Banks in the First Quarter of 2024” released the same day revealed that the net profit of the 42 A-share listed banks decreased by 0.81% year-on-year in the first quarter of 2024, and operating income decreased by 1.73% year-on-year. The total assets at the end of the first quarter of 2024 increased by 3.93% compared to the end of 2023, which is 1.69 percentage points lower than the growth rate of 5.62% in the first quarter of 2023. The weighted average non-performing loan ratio stood at 1.25%, a decrease of 0.01 percentage points from the end of 2023.
EY believes that listed banks are still facing significant operational pressures in the first quarter of 2024.
In the context of slowing macroeconomic growth and increased volatility in the capital markets, The 21st Century Business Herald stated on May 14th that with a decline in investment and consumption willingness of corporate residents and the increased impact of fluctuations in the net value of financial products, listed banks are facing pressure due to faster deposit growth, a clear trend towards deposit maturity, and cost control.