Zhongjin: Profit differentiation in the banking industry in 2024, improvement in profit growth of large and joint-stock banks.

Golden Securities released a research report stating that in 2024, there will be differentiation in the profit performance of commercial banks, with state-owned big banks and joint-stock banks seeing marginal improvement in profit growth, while urban and rural commercial banks will experience significant profit fluctuations. State-owned big banks and joint-stock banks saw a year-on-year increase in quarterly profits of 2.1% and 7.3% respectively, mainly benefiting from bond investment income and favorable fair value changes; on the other hand, urban and rural commercial banks witnessed a significant year-on-year profit decline, which may be related to mergers and restructuring of non-listed small and medium-sized banks. Looking ahead, the expansion of the banking industry will slow down, and pressure on net interest margins will continue to exist, but overall asset quality is expected to remain stable. The main points from Golden Securities are as follows: Differentiation in profit performance, with big banks and joint-stock banks showing marginal improvement in profit growth, while urban and rural commercial banks exhibit large fluctuations. In 2024, the net profit of commercial banks is expected to decline by 2.3% year-on-year, with a quarterly decline of 12.2% in 4Q24. State-owned big banks saw a 2.1% year-on-year increase in quarterly profits, while joint-stock banks saw a 7.3% increase, showing improvement compared to 3Q24, primarily due to bond investment income and favorable fair value changes. Urban commercial banks saw a year-on-year decline of 87.6%, and rural commercial banks saw a year-on-year decline of 79.4%, which Golden Securities believes may be due to mergers and restructuring involving non-listed small and medium-sized banks. Among the 12 listed regional banks that have already disclosed quarterly performance reports, the year-on-year net profit growth is 13.4%, maintaining a rapid pace of growth. The capital profit rate of commercial banks in 2024 is expected to decrease by 0.8 percentage points to 8.1% year-on-year. Expansion of big banks is slowing down, while mid-sized banks are seeing marginal acceleration in growth; there is limited decrease in net interest margins. At the end of 4Q24, total assets of commercial banks increased by 7.2% year-on-year, showing a slight slowdown compared to the previous period, possibly affected by hidden debt substitution and credit demand. Specifically, the asset growth rate of state-owned big banks decreased from 9.2% at the end of 3Q24 to 7.6%, while the growth rate of mid-sized banks accelerated, with joint-stock banks growing by 4.7% year-on-year, urban commercial banks growing by 9.0%, and rural commercial banks growing by 6.0%. The differences in growth rates between big banks and mid-sized banks may be attributed to base effects. Looking ahead, Golden Securities predicts that in an optimistic scenario, new bank lending in 2025 may remain the same year-on-year or slightly decrease, with a decrease in growth rate by close to 1 percentage point; although corporate loans remain the main investment direction structurally, the contribution of new retail loans may slightly increase due to the recovery in second-hand housing transactions and reduced early repayments. The net interest margin of commercial banks in 2024 was 1.52%, a decrease of 1 basis point compared to the previous three quarters, with a limited decrease in net interest margins. Specifically, state-owned big banks/joint-stock banks/urban commercial banks/rural commercial banks saw a quarter-on-quarter decline of -0.3bp/-2bp/-5bp/+1bp to 1.44%/1.61%/1.38%/1.73%. Looking ahead, Golden Securities predicts that asset repricing and reductions in the loan prime rate will continue to drive a decrease in net interest margins.