the performance differentiation of city commercial banks is accelerating
2024-10-01
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"china economic weekly" reporter sun tingyang | reporting from beijing
the performance gap between high-performing listed city commercial banks (hereinafter referred to as "city commercial banks") and low-performing city commercial banks is widening.
in the first half of this year, 12 of the 16 comparable city commercial banks had a year-on-year increase in earnings per share, and 4 had a year-on-year decrease. the arithmetic average of the top three earnings per share increases is 0.85 yuan, and the top three earnings per share decreases are only 0.45 yuan. the former is 88% higher than the latter, which is nearly 40 percentage points higher than the gap in 2023.
in the first half of this year, there were 5 city commercial banks with earnings per share exceeding 1 yuan, and 6 with earnings per share less than 0.5 yuan. in the first half of last year, there were 4 and 5 respectively.
the performance differentiation of city commercial banks is accelerating
when reviewing the operating conditions of my country's city commercial banks in the first half of this year, we can find that several banks performed particularly well in terms of earnings per share, while some banks also faced challenges.
bank of hangzhou (600926.sh), bank of qingdao (002948.sz) and qilu bank (601665.sh) are the top three city commercial banks in terms of earnings per share increase in the first half of this year. bank of zhengzhou (002936.sz), bank of xiamen (601187.sh) and bank of lanzhou (001227.sz) had the highest earnings per share decline during the same period.
specifically, bank of hangzhou's earnings per share in the first half of this year increased by 21% year-on-year to 1.64 yuan, ranking first among listed city commercial banks. the bank explained in its semi-annual report that the increase in earnings was due to the steady growth in asset size and the continued optimization of the asset-liability structure.
the second and third highest increases were qingdao bank and qilu bank. in the first half of this year, earnings per share growth was 12.5% and 12.2% respectively.
the earnings per share of bank of ningbo (002142.sz) has long been at the top among city commercial banks. this year it continued to rise 5.61% to 2.07 yuan, still ranking first in absolute value.
different from the above-mentioned city commercial banks, the earnings per share of some banks are still declining, and the distance from high-quality banks continues to widen.
bank of zhengzhou's earnings per share in the first half of this year fell 21.74% year-on-year to 0.18 yuan. the bank explained in its semi-annual report that operating income and net profit were lower than those of the same period due to factors such as the continued narrowing of interest spreads and lpr repricing. the bank's net interest margin in the first half of the year was 1.7%, down 0.36 percentage points from the same period last year, and its net interest margin was 1.8%, down 0.33 percentage points from the same period last year.
it is worth noting that zhengzhou bank’s earnings per share in the first half of 2023 ranked second from the bottom among city commercial banks, equivalent to 28% of the average of listed city commercial banks. in the first half of this year, it was only equivalent to 21% of the average.
xiamen bank's earnings per share in the first half of this year fell 15.69% year-on-year to 0.43 yuan, ranking fourth from the bottom among city commercial banks in absolute terms. compared with the same period last year, it fell by two places. the bank explained in its semi-annual report that operating income declined year-on-year due to the narrowing of net interest margins year-on-year, as the amount of provision for credit impairment losses increased significantly year-on-year. however, the bank's non-performing loan ratio in the first half of the year was 0.76%, the same as at the beginning of the year, and its asset quality remained stable; its provision coverage ratio was 396.22%, and its risk compensation capacity remained sufficient.
in addition, there are bank of guiyang and bank of lanzhou. bank of guiyang's earnings per share fell 6.4% to 0.73 yuan. lanzhou bank's earnings per share in 2023 is already at the bottom among city commercial banks. in the first half of this year, it fell 1.7% to 0.14 yuan, still at the bottom.
comparing bank of ningbo, the champion in earnings per share, to bank of lanzhou, which is at the bottom, bank of ningbo's earnings per share in the first half of 2023 were 13.32 times that of lanzhou bank, and in the first half of this year, it was 14.79 times.
increasing non-interest income may be the key
a financial industry researcher told a reporter from china economic weekly that when comparing the income gap between city commercial banks, we must consider not only the gap in the operating capabilities of each bank, but also the region in which each bank is located.
the above-mentioned researcher reminded that when comparing the profitability of various banks, in addition to earnings per share, there is also return on net assets. the profitability of those with high net asset income is significantly higher than that of those with low net asset income. for example, hangzhou bank's return on net assets in the first half of this year was 8.32%, while lanzhou bank and xi'an bank were only 2.89% and 4.24%.
in fact, funds are heavily investing in high-quality city commercial banks. according to statistics from oriental fortune choice, at the end of the first half of this year, the number of public funds held by bank of ningbo and bank of hangzhou was 151 and 77 respectively, and the number of public funds held by bank of zhengzhou, bank of xiamen and lanzhou bank was 0.
the above-mentioned researcher analyzed that the operating performance of city commercial banks is inseparable from the economic development of the city where they are located. bank of hangzhou and bank of ningbo are both located in the economically developed eastern provinces. bank of xi'an (600928.sh), which is also located in the west like lanzhou bank, had earnings per share of 0.3 yuan in the first half of this year and is also in a relatively low position.
in comparison, if we compare the economic size of lanzhou and xi'an with hangzhou and ningbo, there is a big difference between the four. the regional gdp of ningbo city and hangzhou city in 2023 will be 2 trillion yuan and 1.65 trillion yuan respectively, while the gdp of lanzhou city and xi'an city will be 0.35 trillion yuan and 1.2 trillion yuan respectively in the same period.
in addition, business operations have scale effects. the larger the scale, the lower the unit cost. in terms of scale comparison, the total assets of bank of ningbo and bank of hangzhou at the end of the first half of this year were 3 trillion yuan and 1.98 trillion yuan respectively, while those of bank of lanzhou and bank of zhengzhou were only 0.47 trillion yuan and 0.65 trillion yuan.
the above-mentioned researchers believe that the chinese government proposes to accelerate the rise of central china, further promote the development of the western region, encourage cities such as xi'an to accelerate the construction of international gateway hub cities, and improve the sub-regional cooperation support capabilities of provincial capital cities such as lanzhou for neighboring countries. if these cities can seize such opportunities, the operating performance of local commercial banks will also undergo fundamental changes.
the researcher suggested that banks with low earnings per share should increase their proportion of non-interest income. bank of hangzhou, qilu bank, bank of qingdao and bank of ningbo all saw their net interest margins decline in the first half of this year, and their incomes are still growing. this is due to factors such as scale growth and a high proportion of non-interest income.
it is not difficult to see that competition among banks has changed from relying on deposits and loans to competition in intermediary business services. banks with a higher proportion of non-interest income have better operating performance.
in the first half of this year, the top three banks with the highest proportion of non-interest income were bank of nanjing (601009.sh), bank of shanghai (601229.sh) and bank of hangzhou. their proportions all exceeded 38%. during the same period, each of the three banks the income per share is around 1 yuan. the three banks with non-interest income at the bottom are bank of zhengzhou, bank of lanzhou and bank of guiyang. their non-interest income is less than 22%. about 80% of their income still relies on interest income from loans.
therefore, banks with a low proportion of non-interest income will naturally experience pressure on their income and profits when loan interest margins narrow and it becomes difficult to attract deposits. if a bank's proportion of non-interest income increases, its ability to withstand changes in interest spreads will increase and earnings volatility will decrease.
(this article was published in "china economic weekly" issue 18, 2024)
