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author | xiao wang

editor | wang weikai

produced by | prism·tencent xiaoman studio

september 2,china merchants bankhold a 2024 interim performance briefing.

according to the semi-annual report of china merchants bank, its revenue in the first half of the year was 172.945 billion yuan, a year-on-year decrease of 3.09%; its net profit was 75.379 billion yuan, a year-on-year decrease of 1.38%. its provision coverage ratio was 434.42%, which is at a relatively good level in the banking industry.

at the performance meeting, an analyst said frankly that china merchants bank had always had a higher valuation premium than the state-owned banks because of its strong profit growth and high roe (return on equity). however, its profit growth in the first half of the year is similar to that of the state-owned banks, or even worse than some of the large banks. will china merchants bank achieve positive growth in profits for the whole year by releasing more provisions? after all, it still has a higher valuation premium than the state-owned banks.

provisions are funds set aside to deal with loan losses. in the past, some market voices believed that provisions could be used as a tool to adjust bank profits.

the author sorted out that the current price-to-book ratio of china merchants bank (net assets per share/share price per share, an important indicator for observing the valuation level of bank stocks) is 0.84; the share prices of the four major state-owned banks have risen sharply since last year, but their price-to-book ratios are still far lower than that of china merchants bank. the current price-to-book ratios of icbc, abc, ccb and boc are 0.61, 0.66, 0.62 and 0.63 respectively.

in the first half of the year, the net profit growth rates of the four major state-owned banks, namely, industrial and commercial bank of china, agricultural bank of china, china construction bank and bank of china, were -1.89%, 1.99%, -1.80% and -1.24% respectively. in particular, the net profit growth rate of agricultural bank of china was significantly ahead of its peers.

wang liang, president of china merchants bank, responded that, in general, the negative growth in revenue and profit of commercial banks is a fundamental factor. some individual banks have shown positive growth in revenue and profit. china merchants bank, like other mainstream banks, has negative growth in revenue and profit. the difference is that compared with the first quarter, the negative growth rate of revenue and profit of china merchants bank in the second quarter showed a positive trend.

wang liang said that the management team worked hard to maintain a positive trend in revenue and profit. however, we must also see the operational changes behind the financial results. in the context of policies that continue to guide interest rates downward, reduce financing costs for the real economy, and reduce various expenses, china merchants bank insists on doing the right thing and stabilizing the three basics: first, strengthening, expanding and optimizing the customer base; second, maintaining the asset quality of china merchants bank; and third, continuously increasing market share. in order to maintain profit growth, china merchants bank has reduced costs and increased efficiency in financial expense control, while strengthening capital cost and loan pricing management to maintain revenue growth.

wang liang said that china merchants bank will improve its profitability by improving asset quality and reducing risk costs, and will not simply achieve profit growth by reversing provisions and lowering provision coverage ratio.

last week, there were rumors in the market that there might be a policy of "converting existing housing loans into mortgages", which led to a sharp drop in bank stocks last friday. in response, wang liang said, "we have also seen such information in the media, but we have not received any opinions from the macro-financial regulatory authorities, the people's bank of china or the financial administration, nor have we sought opinions from commercial banks. so i think the policy has not been confirmed yet."

wang liang said that if such a policy is to be introduced, it will have a certain negative impact on the existing mortgage interest rates of the banking industry. the macro-management department will do a good job of demonstration and research before introducing such a policy.

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