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on august 30, agricultural bank of china released its 2024 interim results.net profit in the first half of the year was rmb 136.5 billion, up 2.0% year-on-year. operating income was rmb 367.1 billion, up 0.4% year-on-year. net interest income was rmb 290.8 billion, up 0.1% year-on-year. during the reporting period, the bank's net profit, operating income and net interest income achieved positive growth. the net interest margin was 1.45%, up 1bp from the first quarter, showing a stabilizing trend.

"this is not easy in the current economic environment. it has laid a solid foundation for the work throughout the year and verified that the measures and strategies in the first half of the year are effective," said agricultural bank of china president wang zhiheng at the mid-term results conference on august 30.

agricultural bank of china's performance press conference photo source: photo taken by zhang shoulin, a reporter from china business news

net interest margin was 1.45% in the first half of the year, initially stabilizing and recovering

the main income indicators achieved positive growth. what did the agricultural bank do right? wang zhiheng explained it in conjunction with the operating goals and practices for the second half of the year.

he said that the goal for the second half of the year is to maintain the stability of the quality and efficiency of the annual operation. specifically, we will continue to adhere to the general working requirements of "seeking progress in stability, promoting stability through progress, and establishing before breaking down", and strive to achieve stable and improving operating performance with the four "maintain" principles.

first, maintain steady growth in credit scale and continuously optimize its structure.in the first half of the year, we increased our support for the real economy and achieved steady growth in loans. among them, credit support for key areas and weak links continued to increase, and the scale of loans in key areas such as county loans, loans to key counties for rural revitalization, manufacturing, green credit, inclusive finance, and science and technology innovation industries maintained a high growth rate, and the structure continued to be optimized. in the next step, abc will focus on its main responsibilities and businesses, actively follow the guidance of macroeconomic control policies, strive to do a good job in the "five major articles", serve new quality productivity, and provide high-quality financial supply for economic transformation.

the second is to maintain the overall stability of the net interest margin.the net interest margin in the first half of the year was 1.45%, up 1bp from the first quarter, and the net interest margin initially stabilized and rebounded. in the second half of the year, abc will continue to do a good job in volume-price coordination management, improve the level of pricing refinement, promote service capabilities and customer infrastructure construction, strengthen liability cost control, and strive to keep the net interest margin generally stable.

the third is to maintain diversified growth of non-interest income.in the first half of the year, the fee income fell by 7.9%, which was narrower than that in the first quarter. abc will seize the policy opportunities of expanding domestic demand, promoting consumption upgrades, and promoting high-quality development of the capital market, and continue to promote high-quality development of intermediary business. at the same time, abc will continue to track market changes, flexibly respond to financial market fluctuations, dynamically optimize investment portfolios and trading strategies, continue to tap the potential for increased income, and strive to promote the growth of other non-interest income.

fourth, maintain stable asset quality.in the first half of the year, the non-performing loan ratio of abc was 1.32% and the overdue loan ratio was 1.07%, both down 0.01 percentage points from the end of last year. the provision coverage ratio continued to remain at a high level of 303.94%, with sufficient risk compensation capacity.

wang zhiheng said that in the next step, abc will continue to strengthen comprehensive risk management, especially strengthen the prevention and resolution of credit risks in key areas, strengthen the management of overdue loans, and increase the efforts to collect and dispose of non-performing assets to maintain stable asset quality.

liability cost pressure will continue to ease

net interest margin is one of the core indicators of bank operations. against the backdrop of a downward trend in deposit and loan interest rates, the future changes in the net interest margin of the agricultural bank of china have attracted much attention from the outside world.

wang zhiheng analyzed that since the beginning of this year, under the guidance of macroeconomic policies, policy interest rates and lpr have been lowered, the central market interest rate has generally declined, and the banking industry has continued to reasonably and orderly give benefits to the real economy. in the first half of the year, the net interest margin of the agricultural bank of china was 1.45%, a temporary increase of 1bp compared with the first quarter. it was mainly affected by the following factors:

asset side,affected by the reduction of lpr, the adjustment of mortgage interest rate policy and the initiative to give benefits to the real economy, the loan interest rate of the banking industry continued to decline. the change of abc was consistent with that of comparable peers, but the decline improved year-on-year. this is mainly because abc closely followed the direction of economic transformation, focused on the "three rural" counties and five major articles, dug deep into the needs of the real economy, and increased the optimization of credit structure. the contribution of total credit growth and structural optimization to net interest margin has further increased.

on the liability side,actively transmit and implement the requirements of the market-oriented adjustment mechanism for deposit interest rates. in 2023, abc and comparable peers successively lowered the deposit listing interest rate three times. with the maturity and repricing of deposits this year, especially the repricing of medium- and long-term time deposits, the interest rate of new deposits has dropped significantly, the pressure on deposit costs has been alleviated, and the deposit interest rate has dropped to a certain extent compared with the previous year.

in july this year, the reduction in policy interest rates and lpr helped consolidate the continued upward trend of the economy. the reduction in deposit rates by comparable peers on july 25 basically offset the impact of the lpr reduction in july, which was conducive to stabilizing the net interest margin level.

"we believe that the trend of interest rate spreads will remain generally stable in the future."wang zhiheng said that in the context of increasing financial support for the real economy and promoting a steady decline in the overall financing cost of society, the loan interest rate is still under downward pressure. coupled with the overall low interest rates in the bond market, the asset interest rate will still be under pressure. efforts will be made to achieve a reasonable growth in credit scale and continuous optimization of structure and quality.

on the liability side, from a policy perspective, with the reduction in deposit rates in july, the effectiveness of the deposit rate market-based adjustment mechanism will continue to be released, and the continued impact of the fed's multiple interest rate hikes on the rise in foreign currency debt interest rates has basically ended, and the pressure on liability costs will continue to be alleviated. in terms of management, we will further strengthen liability cost control, improve basic service capabilities, and continuously improve liability quality. there is room for improvement in deposit interest payment costs.

taking all the above factors into consideration, wang zhiheng predicts that the net interest margin will remain generally stable in the second half of the year, and efforts will be made to achieve further marginal improvements.

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