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the leading private banks saw their net profits decline for the first time, the gap between the top and bottom banks continued to widen, and non-performing assets rose sharply. these are the first half-year reports submitted by private banks entering their tenth year of development.

a reporter from china business news found that 8 of the 19 private banks disclosed their semi-annual financial results for 2024, namely mybank, sichuan xinwang bank, chongqing fumin bank, beijing zhongguancun bank, jilin yilian bank, wenzhou minshang bank, meizhou keshang bank and fujian huatong bank. among them, only 1 bank saw a decline in operating income, and 4 banks saw a decline in net profit. among them, mybank saw an increase in revenue but not profit, and saw its first decline in profit in recent years. minshang bank lagged behind, with both revenue and profit declining.

overall, the gap between the top and bottom private banks is gradually widening. while maintaining a certain net interest margin advantage, they are also under pressure from a downward spread. in addition, asset quality has declined significantly. industry insiders pointed out that in the face of multiple challenges such as changes in the macro environment and downward spreads, private banks need to adhere to a differentiated and characteristic development path, stand out with digital operations, hold on to long-tail customers, and refine and thoroughly differentiate the segmented tracks.

the gap between the top and the bottom continues to widen

according to the semi-annual reports disclosed by various private banks, there is a serious "28" split in operating income and net profit. mybank achieved operating income of 10.076 billion yuan in the first half of the year, which is more than 3 billion yuan more than the total operating income of 7.018 billion yuan of the other seven banks. in the same period last year, mybank achieved operating income of 8.357 billion yuan, but there is still a big gap compared with the revenue scale of 19.645 billion yuan of webank, which ranked first. looking at the tail private banks, the operating income is in the single digit.

among the eight private banks, only one saw a decline in revenue growth, with jilin yilian bank's revenue falling 4.94% to 605 million yuan. reporters found that yilian bank's operating income has been unstable since its opening in 2017. it expanded from 63 million yuan in 2017 to 1.567 billion yuan in 2020, and then fell for three consecutive years. wind data shows that from 2021 to 2023, the bank's operating income was 1.433 billion yuan, 1.083 billion yuan, and 1.065 billion yuan, respectively. by the end of 2023, it had shrunk by one-third from its peak revenue scale.

the remaining seven banks all achieved revenue expansion, with meizhou keshang bank expanding the fastest, with revenue increasing by 48% year-on-year to 466 million yuan. although the bank's revenue scale has been in the single digit for many years, it has grown rapidly in recent years. after breaking through 100 million yuan in the same period of 2018, it broke through 200 million yuan in revenue in 2022. in addition, xinwang bank, mybank, and zhongguancun bank also achieved certain revenue growth.

in terms of net profit, mybank ranked first with 1.443 billion yuan, and the total amount was nearly 200 million yuan more than the total net profit of the other seven banks of 1.267 billion yuan. although the scale of net profit is obviously superior to other banks, mybank's net profit in the first half of this year fell by 31.19% year-on-year, and the situation of increased revenue but not increased profit appeared for the first time in recent years. the reporter sorted out the net profit of mybank from 2021 to the mid-term of 2023 and found that the bank's net profit in the previous few years had increased year-on-year, with growth rates of 79.09%, 65.69% and 28.49% respectively.

yilian bank is the only bank that has seen a decline in both revenue and net profit. similar to its operating income performance, yilian bank's net profit performance is also relatively volatile. in 2021, its net profit shrank by more than 70% to 53 million yuan, and then rebounded to 140 million yuan in 2023. however, by the end of june this year, the bank's net profit further decreased to 18 million yuan, a year-on-year decline of 70.04%.

the reverse trend in interest rate differentials is unsustainable

under the influence of factors such as the downward trend of asset-side interest rates and the strengthening trend of regular deposits, the banking industry is generally facing the pressure of narrowing net interest margins, but the interest margin level of private banks still maintains a certain advantage. data disclosed by regulators show that the net interest margin of the banking industry was 1.54% in the second quarter. although the net interest margin of private banks fell from 4.32% in the first quarter to 4.21% in the second quarter, it is still much higher than the industry average.

according to the two private banks that disclosed their net interest margins, their net interest margins actually increased. mybank's net interest margin was 3.64%, up 23 basis points from the end of last year and 55 basis points from 3.09% in the same period last year; yilian bank's net interest margin was 2.22%, also up 1 basis point from the same period last year.

while maintaining a certain interest rate advantage, the net interest income of private banks increased. among them, the net interest income of mybank increased by 16.40% year-on-year, and that of wenzhou minshang bank increased by 1.45 percentage points compared with the same period last year. however, the net interest income of yilian bank declined by 12.92%.

industry insiders analyzed that the relatively high net interest margin of private banks is closely related to their business positioning. most private banks' core customer groups are small and micro long-tail customers, which are relatively high-risk. private banks naturally have to bear greater capital risk costs, so they need to use a higher net interest margin to cover them. at the same time, private banks pursue the expansion of customer scale, and the cost of acquiring customers is higher than that of large and medium-sized banks, which also needs to be compensated by a higher net interest margin.

however, as many small and medium-sized banks followed suit and lowered their deposit interest rates this year, private banks are also facing pressure from narrowing interest margins. since the end of august, many private banks, including liaoning zhenxing bank, mybank, and webank, have successively lowered their multi-term time deposit interest rates, with the reduction ranging from 10 to 30 bp. among them, webank lowered the annual interest rates of two-, three-, and five-year personal deposit products from september 9, with the annual interest rate of five-year time deposits reduced from 2.45% to 2.20%, a decrease of 25 bp.

people in the banking industry believe that private banks relying solely on high interest rates to attract deposits will increase the cost of bank funds, and this approach is unsustainable. zhou maohua, an analyst at the financial markets department of everbright bank, said that private banks are currently facing insufficient endogenous financing capabilities, narrow exogenous debt channels, weak brand effects, lack of advantages in terms of outlets, high debt and overall operating costs, and great pressure from industry competition.

asset quality is still declining

in the first half of 2024, the non-performing loan ratio of private banks faced certain pressure. according to data released by the state financial supervision and administration bureau, the balance of non-performing loans of private banks was 22.8 billion yuan, an increase of 300 million yuan from the previous month and 3.3 billion yuan from the previous year; the non-performing loan ratio was 1.75%, an increase of 0.03% from the previous month and 0.16% from the previous year.

specifically, for individual banks that have disclosed their operating data, such as wenzhou minshang bank, as of the end of the second quarter, the bank's asset size was 45.864 billion yuan, a year-on-year increase of 11.67%; operating income was 558 million yuan, a year-on-year increase of 0.7%; net profit was 267 million yuan, a year-on-year decrease of 3.8%, and the non-performing loan ratio was 0.95%, 0.63 percentage points higher than the 0.32% in the same period last year, an increase of about three times. in the first half of this year, the non-performing loan ratio of yilian bank reached 1.73%, which was also 0.08 percentage points higher than the 1.65% in the same period last year.

in addition, among the private banks that have not disclosed their specific non-performing loan rates, there have been signs of rising non-performing loan rates. although the asset scale of mybank has achieved a certain growth, the asset quality has declined. as of the end of 2023, the non-performing loan ratio of mybank rose to 2.28%, an increase of 0.34 percentage points from 1.94% at the end of 2022. huarui bank's non-performing risks also accumulated rapidly, rising sharply from 0.69% in the previous year to 1.03% in 2019, breaking through 1% for the first time and rising continuously thereafter. by the end of 2023, the balance of non-performing loans was 525 million yuan, and the non-performing loan ratio reached 1.66%.

the non-performing loan ratio reflects the quality of a bank's credit assets, while the provision coverage ratio reflects the bank's corresponding risk compensation capacity. judging from the provision coverage ratio of private banks, it has failed to rise synchronously with the rise in the non-performing rate, but has instead declined. as of the end of june this year, the non-performing loan provision coverage ratios of yilian bank and minshang bank were 169.21% and 287.12%, respectively, while in the same period last year, they were 182.47% and 803.32%, respectively. the provision coverage ratio of minshang bank fell sharply. looking back, the provision coverage ratio of mybank has also dropped significantly, from 363.95% in 2021 to 199.14% in 2023.

at the same time, private banks have seen a number of large-scale disposals of non-performing assets. for example, mybank this year transferred the income rights of about 359 million yuan of non-performing assets for 28 million yuan, with a starting price of 10% off. the increase in non-performing risks also brings risks to shareholders of private banks, and some private banks have been put on the auction block. recently, nearly 200 million yuan of huarui bank’s equity was auctioned off, with a starting price of 136.5 million yuan, equivalent to a 30% discount on the agreed price.

after ten years of development, industry insiders believe that in the face of a series of challenges such as the current economic downturn and the continuous pressure on the banking industry, private banks should adhere to their original intention of differentiation, change their original high-interest strategy, and use technology to find a new way. du juan, a senior researcher at the jiangsu commercial bank research institute, believes that private banks are relatively small in scale and cannot compete directly with large and comprehensive banks. this requires private banks to achieve business breakthroughs in segmented tracks, grasp the digital business development model, and promote business development based on smart marketing, digital risk control, and smart customer service.