the net interest margins of state-owned banks and joint-stock banks all narrowed in the first half of the year and will still face pressure in the second half of the year
2024-09-04
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the latest disclosed 2024 semi-annual report shows that how to stabilize the interest rate spread is still a difficult problem facing every bank.
in the first half of this year, the net interest margin of the six state-owned banks and nine national joint-stock banks listed on the a-share market narrowed collectively, and the net interest margin of some banks showed a month-on-month improvement in the second quarter.
with the 1-year and 5-year lprs being lowered again in july this year, many banks said at their first-half performance conferences that with the reduction in deposit rates, the two can basically offset each other. looking ahead to the second half of the year, the management of many banks expressed confidence in marginal improvements while stating that interest rate spreads are still under pressure.
the interest margins of many banks improved in the second quarter compared with the previous quarter
although the net interest margin of large state-owned banks generally declined at the end of june compared with the end of last year, from a single quarter perspective, agricultural bank of china and bank of communications achieved a quarter-on-quarter improvement in the second quarter, rising by 1bp and 2bp respectively from the first quarter, while bank of china remained unchanged from the first quarter.
postal savings bank of china has the highest net interest margin among the large state-owned banks, followed by china construction bank, and the net interest margins of agricultural bank of china, industrial and commercial bank of china and bank of china are comparable.
changes in net interest margin of the six state-owned banks over the past year; data source: wind
wang zhiheng, president of the agricultural bank of china, said at the bank's first-half performance meeting that since the beginning of this year, under the guidance of macroeconomic policies, policy interest rates and lprs have been lowered, and the overall market interest rate center has declined. the banking industry continues to reasonably and orderly give benefits to the real economy. the agricultural bank of china's net interest margin in the first half of the year was 1.45%, up 1bp from the first quarter, and the net interest margin has initially stabilized and rebounded.
the net interest margin of bank of communications was 1.29% in the first half of the year, up 1bp from the end of the previous year. the interest margin in the second quarter was 1.30%, up 3bp from the previous quarter. in this regard, zhou wanfu, deputy president of bank of communications, said at the performance meeting that this was because the yield on interest-bearing assets and the cost of liabilities both declined from the previous quarter, but the decline on the liability side was greater. from the perspective of the whole year, the goal of bank of communications is to keep the net interest margin basically stable and strive to improve it.
the net interest margin of joint-stock banks also declined in the first half of the year compared with the end of last year. looking at the quarter alone, the net interest margin of citic bank increased by 7 basis points from the first quarter, and the net interest margin of pudong development bank's parent company increased by 2 basis points from the first quarter.
changes in net interest margin of a-share listed joint-stock banks over the past year; data source: wind
among the nine a-share listed joint-stock banks, china merchants bank (2%) had the highest net interest margin in the first half of the year, followed by ping an bank (1.96%).
"net interest margin is an issue that has been discussed at every performance exchange meeting in recent years. our conclusion every time is that it continues to be under pressure, and this year we are still facing such an environment - the net interest margin continues to be under pressure." peng jiawen, vice president of china merchants bank, admitted at the performance meeting that the year-on-year decline in net interest margin in the second quarter narrowed compared with the first quarter, but overall, the net interest margin is still declining. year-on-year, in the first half of this year, the net interest margin fell by 23 basis points compared with the same period last year, narrowing from the 27 basis points year-on-year decline in the first quarter, but still reflecting great pressure.
several bank managers said that the net interest margin is expected to improve marginally in the second half of the year
the management of listed banks also gave the latest assessment on the interest rate spread trend in the second half of the year.
in july, the policy rate and lpr were lowered. at the same time, major banks subsequently lowered their deposit rates. many banks stated that the two effects could basically offset each other and would help stabilize the net interest margin level.
zhang yi, president of china construction bank, stated at the bank's 2024 mid-year performance conference that in july, the one-year and five-year lprs were lowered by 10 basis points respectively. at the same time, major banks lowered deposit rates. we have calculated that this deposit rate adjustment can effectively offset the negative impact of the decline in lpr this year, and the impact on the full-year net interest margin can be said to be negligible.
lin shu, general manager of the planning and finance department of industrial bank, said that the reduction of lpr in july will have an impact of about 1 basis point on the net interest margin of industrial bank in the second half of the year, and an impact of about 500 million yuan on interest income; it will reduce the net interest margin by about 4 basis points in 2025, and reduce interest income by about 3 billion yuan. in general, industrial bank will face great pressure on the subsequent asset yield. overall, the net interest margin of industrial bank will still narrow in the second half of the year, but from the full-year forecast, it will be better than the budget target set at the beginning of the year.
management of several major banks also expressed confidence at performance meetings that net interest margins will improve marginally in the second half of the year.
wang zhiheng said that the interest rate spread trend will remain generally stable in the next step, and efforts will be made to achieve further marginal improvements.
he pointed out 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 rate in the bond market, the interest rate on the asset side will still be under pressure. efforts will be made to achieve a reasonable growth in the scale of credit and continuous optimization of structure and quality. on the liability side, from a policy perspective, with the reduction of deposit interest rates in july, the effectiveness of the market-based adjustment mechanism for deposit interest rates 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, liability cost control will be further strengthened, basic service capabilities will be improved, and liability quality will be continuously improved. there is room for improvement in deposit interest payment costs.
wang liang, president of china merchants bank, said: "overall, i believe that china merchants bank's net interest margin is improving marginally, improving quarter by quarter, and gradually stabilizing at the bottom. at the same time, it will continue to lead the market in the future."
peng jiawen, vice president of china merchants bank, pointed out that the downward pressure on net interest margin still exists, but it will be alleviated marginally. this is the trend this year. at the same time, the net interest margin may gradually stabilize next year, provided that there is no major change in the external situation and no policies that have a significant impact on the net interest margin of commercial banks are introduced.
xu xueming, vice president of postal savings bank of china, said at the mid-term performance conference that bank interest margins will still face pressure in the next step, but the downward trend is expected to continue. he pointed out that commercial banks need a relatively reasonable interest margin space to maintain profit growth, achieve capital replenishment and risk coverage, which is related to banks' service to the real economy and long-term sustainable development, as well as financial stability.
"interest rate spread is the 'lifeline' of bank operations and management," said liu cheng, president of citic bank, at the performance conference. "from the perspective of the current overall economic situation, policy orientation, and interest rate changes, it can be said that interest rate spread is still facing pressure to narrow. under this circumstance, how to stabilize interest rate spread is a big challenge for every bank. our bank will focus on improving business capabilities and optimizing business structure, continue to consolidate its interest rate spread advantage, and maintain its leading position among peers."
the paper reporter chen yueshi
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