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produced by | dharma finance

on august 29, china merchants bank released its 2024 semi-annual report. during the reporting period, the bank achieved operating income of 172.945 billion yuan, a year-on-year decrease of 3.09%; and achieved net profit attributable to shareholders of the parent company of 74.743 billion yuan, a year-on-year decrease of 1.33%.

as of the end of june, the total assets of china merchants bank were 11.57 trillion yuan, up 4.95% from the end of last year; the total loans and advances were 6.75 trillion yuan, up 3.67% from the end of last year; and the total customer deposits were 8.66 trillion yuan, up 6.22% from the end of last year.

in terms of single-quarter performance, china merchants bank's revenue in the second quarter increased slightly compared with the first quarter, but its net profit fell by 3.71% month-on-month to 36.666 billion yuan.

it is worth mentioning that it is very rare for china merchants bank's semi-annual report to show a decline in both revenue and net profit. the last time china merchants bank's semi-annual report showed a double decline was in 2009.

in the context of the continuous decline in bank net interest margins, china merchants bank's net interest income and non-interest net income both declined in the first half of the year, and its core retail business also suffered a certain impact. in particular, "big wealth management", an important tool for the transformation to a light bank, has frequently exposed risks, significantly dragging down its performance.

interest income and non-interest income both fell

the slowdown in loan size and the declining net interest margin have become the main factors behind the decline in china merchants bank's operating income.

during the reporting period, the total amount of loans of china merchants bank increased by 238.94 billion yuan, an increase of 3.67%. in the same period last year, the total amount of loans of the bank increased by 303.98 billion yuan, an increase of 5.02%. in terms of net interest margin, the net interest margin of china merchants bank continued to decline, gradually decreasing from 2.59% in 2019 to 2%. even so, among joint-stock banks, china merchants bank's net interest margin is still leading.

at the shareholders' meeting in june, wang liang, president of china merchants bank, said that for china merchants bank, the net interest margin will continue to decline, but will gradually slow down and stabilize. as long as the asset quality is maintained at a good level and the provision coverage ratio remains high, the profit level will be relatively at the bottom and show a stabilizing trend.

in the first half of this year, china merchants bank achieved a net interest income of 104.449 billion yuan, a year-on-year decrease of 4.17%. not only did the net interest income decline, but china merchants bank's non-interest net income also declined. during the reporting period, china merchants bank achieved a non-interest net income of 68.496 billion yuan, a year-on-year decrease of 1.39%.

it is worth noting that the growth rate of the number of retail customers of china merchants bank is also slowing down. in 2023, although the performance of china merchants bank is weak, the growth rate of the number of customers is good. it can still counter the downward risk of net interest margin through the tactic of "compensating price with volume" and reserve new customers to survive the cycle. however, with the slowdown in the growth rate of the number of customers, it may be difficult for china merchants bank to restore its previous high growth posture.

as of the end of june, china merchants bank's retail loans amounted to 3.54 trillion yuan, accounting for 52.48% of the total loans. there were 202 million retail customers, an increase of 2.54% from the end of last year. in the same period of 2023, the growth rate of china merchants bank's retail customer base was 3.26%.

in fact, starting from 2022, china merchants bank began to show pressure, and the growth rate of revenue and net profit began to slow down. in 2023, china merchants bank appropriately enlarged the current profit by reducing the provision for impairment and maintained the growth of net profit. although china merchants bank continued to reduce provisions in the first half of this year, it still failed to avoid a decline in net profit.

in the first half of this year, china merchants bank's pre-provision profit was 116.577 billion yuan, which has returned to the level of three years ago. the year-on-year decline of 4.52% also hit a new low in the past decade. at the same time, the amount of impairment provision also fell for three consecutive years, falling to 26.936 billion yuan.

in terms of asset quality, china merchants bank performed best among the joint-stock banks that have disclosed their interim reports. its non-performing loan balance was 63.427 billion yuan, an increase of 1.848 billion yuan from the end of last year; its non-performing loan ratio was 0.94%, a decrease of 0.01 percentage point from the end of last year.

big wealth management encounters obstacles

competition in the banking industry is becoming increasingly fierce, and the overall market has entered a stage of stock competition. as various banks have transformed into light banks, china merchants bank's retail business, which has always been ahead of its peers, has been impacted, and its position as the "king of retail" has begun to waver.

in 2020, china merchants bank proposed the concept of "big wealth management" and further transformed itself into a light bank, including fee and commission income from wealth management, asset management and custody business. however, starting from 2022, the pressure of china merchants bank's big wealth management began to emerge.

in the first half of this year, compared with the decline in net interest income, china merchants bank's non-interest net income declined relatively slowly, down 1.39% year-on-year. however, after breaking down non-interest income, it is not difficult to find that the reason why china merchants bank's overall non-interest net income performed well in the first half of the year was because the bond market continued to rise in the first half of the year, which enabled china merchants bank to achieve good investment returns.

it is precisely because of the performance of china merchants bank's investment income that has made a significant contribution to its non-interest net income that people have overlooked the decline in fee and commission income. in the first half of this year, china merchants bank's fee and commission income was 42.552 billion yuan, a year-on-year decrease of 17.11%.

in an environment where the entire equity market performed poorly, the effect of insurance and fund fee reduction continued, and the scale and sales of equity funds declined, resulting in a significant decline in china merchants bank's large wealth income.

among the fees and commissions, except for the settlement and clearing fees, which increased slightly, all other items decreased year-on-year, with wealth management fees and commissions decreasing the most, by 32.51%. among them, the agency income coefficients of insurance, funds, and trusts declined, with insurance income decreasing by as much as 57.34% year-on-year.

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