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commercial banks' retail business is shrinking across the board.

in the first half of this year, affected by factors such as the weak economic recovery and the continued sluggish willingness of residents to spend, the retail business of commercial banks has collectively slowed down. among the joint-stock banks, except for china merchants bank, the three benchmark banks in retail business, ping an bank, citic bank and industrial bank, have experienced a comprehensive stall, and retail revenue and profit indicators have shown a significant decline. among them, the housing mortgage loan business and credit card business, which contribute the highest yield, showed signs of shrinking.

for the retail business of commercial banks, the basic factors that supported the rapid growth of residents' wealth in the past few years have gradually disintegrated. now, facing the overall decline in the yield of retail business and the downward trend in the asset quality of retail business, how should the retail business develop in the next step?

retail revenue and profits decline

it is not difficult to find out from the semi-annual reports of listed banks that the retail business of various commercial banks has declined to varying degrees, and this trend has spread to some benchmark banks in retail business.

as of the end of june this year, excluding china merchants bank, whose retail aum balance reached 14.2 trillion yuan, the retail aum of the above three banks were 448 million yuan, 442 million yuan and 412 million yuan respectively, ranking second, third and fourth.

whether it is the income or profit of retail business, ping an bank, citic bank and industrial bank have all seen a decline in key indicators in the first half of the year. ping an bank, which had a retail business revenue of 52.631 billion yuan last year, saw a cliff-like drop in this business revenue in the first half of this year, a sharp decline of 13.54 billion yuan to 39.091 billion yuan, a year-on-year decline of 25.73%, and the scale has returned to the same period in 2019. when talking about the reasons for the sharp decline in the bank's retail business revenue, ping an bank's management mentioned that this was because the bank took the initiative to abandon hundreds of billions of high-risk retail assets, which had a significant impact on revenue.

in the past five years, ping an bank has achieved rapid development in its retail business under the strategy of focusing on retail business. retail revenue increased from rmb 29.316 billion in the first half of 2018 to rmb 38.596 billion in the same period of 2019. in the first half of 2020, it exceeded rmb 40 billion to rmb 43.353 billion. it will remain above rmb 50 billion in the same period of 2022 and 2023. however, in the first half of this year, the retail business experienced a cliff-like decline, and the proportion of revenue also dropped sharply to 50.7%, which had previously remained at 57%.

the decline in business revenue dragged down the net profit performance. as of the end of the second quarter of this year, ping an bank's retail net profit share hit a new low since the bank's listing, only in single digits, at 7%. last year, this indicator reached 34.10%. in the same period from 2018 to 2022, this indicator was 67.90%, 70.20%, 54.70%, 66.70% and 50.19% respectively.

the decline in retail business revenue of citic bank in the first half of the year was not as obvious as that of ping an bank. since 2015, citic bank has focused on building a business structure with retail business and financial market as its two wings. in the past few years, the retail business has developed rapidly. in 2021, the proportion of retail revenue exceeded 40%. by the end of 2023, this proportion rose to 42%. in the first half of this year, the retail banking business revenue of citic bank dropped from 43.997 billion yuan in the same period last year to 43.464 billion yuan, and the contribution to revenue dropped from 41.4% to 39.9%.

however, while the retail business revenue declined slightly, the pre-tax profit of citic bank's business declined sharply. in the first half of this year, the bank's pre-tax profit of retail banking business decreased by 8.564 billion yuan year-on-year, a decrease of 76.21%. this was mainly due to the increase in credit impairment losses, of which the credit impairment losses of retail banking business were 25.537 billion yuan, an increase of 7.597 billion yuan year-on-year, which is equivalent to a decrease of more than 7 billion yuan in pre-tax profit. the bank's credit impairment losses in retail banking business accounted for 74.3% of its total credit impairment losses.

industrial bank's semi-annual report did not disclose indicators such as retail business revenue and profit, but data showed that the balance of its retail personal business loans and consumer loans (excluding subsidiaries) increased by 5.66% and 5.67% respectively compared with the end of last year. however, the bank's retail aum growth has slowed down. in the first half of the year, the indicator reached 4.88 trillion yuan, an increase of only 1.88% from the end of last year, the lowest growth rate among joint-stock banks.

in addition, in an environment where the banking industry as a whole is under pressure from interest rate spreads, bank loan business related to interest rate spreads has clearly stalled, especially credit card business and housing mortgage loans, and key indicators have continued to shrink.

the semi-annual report shows that by the end of the second quarter, ping an bank's bank card fee income was 6.412 billion yuan, a year-on-year decrease of 23.3%. citic bank's credit card transaction volume in the first half of the year fell 8.44% year-on-year from the end of june 2023, and realized a net income of 16.353 billion yuan in fees and commissions, a year-on-year decrease of 2.710 billion yuan, a decrease of 14.22%. industrial bank's credit card transaction volume fell 18.17% from the same period last year, ranking second among joint-stock banks.

in addition to the continued pressure on the credit card business, another important business of the above three banks - housing mortgage loans - is also facing considerable problems.

although the three banks have achieved growth in the balance of housing mortgage loans in the first half of the year, the quality of loan assets has declined. among them, the balance of housing mortgage loans of ping an bank was 306.576 billion yuan, an increase of 1.0% from the end of last year. however, the non-performing rate of housing mortgage loans was 0.3%, an increase of 0.02 percentage points year-on-year. the semi-annual report disclosed by citic bank showed that the bank's personal housing mortgage loan balance was 988.457 billion yuan, an increase of 17.286 billion yuan from the end of last year. the non-performing rate of personal housing loans was 0.71%, an increase of 0.21 percentage points from the end of last year; among them, the loan rate of attention was 0.30%, an increase of 0.05 percentage points from the end of last year. in addition, the balance of personal mortgage loans of industrial bank in the first half of the year was 1.07 trillion yuan, and the non-performing rate was 0.65%, an increase of 0.08 percentage points from the end of 2023.

changing the development strategy of retail business

faced with the collective slowdown of retail business and the pressure on retail business asset quality, how will the above-mentioned banks view the current market environment and how will they adjust their retail business strategies to cope with market risks? industry insiders pointed out that it is expected that in the second half of the year and for some time to come, the quality control of retail credit assets of various banks will still face challenges, among which the non-performing rate, attention rate and overdue rate of credit may still increase slightly quarter by quarter.

ping an bank's management mentioned that the bank is making in-depth adjustments to its retail business segment from the perspectives of the assessment system, management system, and wealth management system. ping an bank used to adopt a "three highs" retail growth strategy, namely high pricing and high risk on the loan side, and acquiring customers through high-yield products on the deposit side. "but now this approach is being overturned. starting from may, ping an bank's retail savings interest rate has dropped rapidly. by july, it is no longer the highest among joint-stock banks, and it will be further reduced by the end of the year." the bank's management said at the performance conference.

focusing on improving the loan quality of retail business, citic bank pointed out that it will achieve quality credit growth. it will increase the scene penetration of high-quality target customers, strengthen the risk control system of "pre-loan, mid-loan and post-loan", and strive to promote the integrated risk control capabilities of personal loans, credit cards and baixin bank. in addition, it will solidify the management of mass customer groups. the bank will increase the scene customer acquisition efforts, promote the "integration of customer acquisition and activation", set up a mass customer digital management team at the branch end, improve customer stickiness and activity, and drive the growth of low-cost settlement deposits.

industrial bank proposed that expanding intermediary business to release momentum will become the focus of the bank's operations in the second half of the year. "we must focus on the five key tasks of capacity building, including optimizing liability structure, expanding intermediary business, building a retail system, and resolving key risks, to ensure the completion of the annual target tasks," the bank pointed out in its semi-annual report.