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1、Unleashing hidden potential:On the road to recoveryChina Banking Review 2023 1HChina Banking Review 2023 1H1Editor-in-chief:Michael HuDeputy Editors:Zhou Zhang,Chen Jia,Chen YanzheEditing team members:Deng Liang,Li Fuqiang,Xie Yu,Zhang Yuanting,Zhu Peisheng,Zhu Qiuhan(arranged in alphabetical order
2、by the pinyin of last name)Expert team:James Chang,Margarita Ho,Richard Zhu,Linda Yip,Toby Zhang,Anthony Chen Olivia Xie,James Tam,Edith Wong The editing team includes:2China Banking Review 2023 1H“In the first half of 2023,despite the complex and severe international environment,Chinas economy cont
3、inued to recover and was generally stable.However,there arenew difficulties and challenges such as insufficient domestic demand,operational difficulties for some enterprises and hidden risks in key sectors.The foundation for sustained economic recovery and development still needs to be solid.The ban
4、king industry,amongst all,faces these challenges directly and increase efforts to serve the real economy.For listed banks,the profit growth rate slowed down while the total assets maintained growth.The balances of non-performing loan(“NPL”)have shown an upward trend.However,the NPL ratio has dropped
5、 from the beginning of the year.The capital adequacy ratio(“CAR”)has shown an overall downward trend.The divergence in banks performances has become increasingly obvious.This report analyses the half-year results of 58 A-share and/or H-share listed banks(see the list on the left for details)as of Ju
6、ne 30,2023.Unless otherwise specified,the banks listed in this publication are arranged according to their unaudited asset size as of June 30,2023.Previous data are all compared with the same calibre.All data used sources from public information such as half-year reports of listed banks.The monetary
7、 amount used in this report is Renminbi Yuan(except for ratios).For more information or to discuss the development of Chinas banking industry with us,please contact your day-to-day business contact at PwC,or our financial services team listed in the appendix to this report.Welcome to China Banking R
8、eview 2023 1HThe report has analysed 58 listed banks,which represent around 82.96%of the total assets and 90.42%of the net profits of commercial banks in China.The analysed banks fall into three categories:Largecommercial banks(6)Industrial and Commercial Bank of ChinaChina Construction BankAgricult
9、ural Bank of ChinaBank of ChinaPostal Savings Bank of ChinaBank of CommunicationsJoint-stockcommercial banks(10)China Merchants BankIndustrial BankShanghai Pudong Development BankChina CITIC BankChina Minsheng BankChina Everbright BankPing An BankHuaxia BankChina Zheshang BankChina Bohai BankCity co
10、mmercial banks and rural commercial banks(42)Bank of BeijingBank of JiangsuBank of ShanghaiBank of NingboBank of NanjingBank of HangzhouHuishang BankZhongyuan BankShengjing BankBank of ChengduBank of ChangshaHarbin BankBank of TianjinBank of ChongqingBank of GuiyangBank of ZhengzhouSuzhou BankBank o
11、f GuizhouBank of QingdaoQilu BankJiangxi BankBank of JiujiangBank of LanzhouBank of XianBank of GansuWeihai City Commercial BankXiamen BankJinshang BankLuzhou BankChongqing Rural Commercial BankShanghai Rural Commercial BankGuangzhou Rural Commercial BankDongguan Rural Commercial BankQingdao Rural C
12、ommercial BankChangshu Rural Commercial BankJilin Jiutai Rural Commercial BankZijin Rural Commercial BankWuxi Rural Commercial BankRural Commercial Bank of ZhangjiagangSuzhou Rural Commercial BankBank of RuifengJiangyin Rural Commercial Bank2China Banking Review 2023 1H*Bank of Jinzhou is not includ
13、ed in the sample analysis due to its delayed release of 2023 interim results.China Banking Review 2023 1H3Overview and Outlook:The banking industry faces challenges and increases efforts to serve the real economy05I.Operational Performance 121.Revenue growth was under pressure,profit before provisio
14、n fell2.Declined profitability3.Net interest spread and net interest margin continued to narrow4.Net interest income,net fee and commission income decreased YoY,other non-interest income became the main source of revenue growth 13151617II.Asset Portfolio181.The growth rate of total assets has picked
15、 up and the stability of credit growth has been strengthened2.Corporate loans served as the growth engine,the relative proportion of retail loans continued to fall3.Increased credit support for infrastructure,environmental and technological innovation 4.Retail loan growth was sluggish,and consumer a
16、nd mortgage loan demands were insufficient5.Financial investment grew steadily,while the growth rate of corporate bonds was lower than the overall1921222324III.Asset Quality251.Increased credit issuance,risk indicators remained stable but under pressure2.Asset quality of regional banks continued to
17、diverge3.The quality of corporate assets continued to improve and the retail NPL ratio increased significantly4.Focus to the impact of new regulations on financial asset classification and improve the ability to forecast credit risks26272933China Banking Review 2023 1H3Table of contentsIV.Liabilitie
18、s and Wealth Management Business 351.Scale of liabilities continued to grow,and the proportion of customer deposits increased2.Scale of deposits increased significantly,and the proportion of fixed-term and retail deposits increased3.Scale of wealth management products decreased,while the scale of cl
19、osed-end products increased4.Yield rate of wealth management products rebounded36373940V.Capital Management411.Capital adequacy ratio generally declined2.Scale of capital raising decreased,and internal capital supplement became the main source3.New capital regulations demand supervision on different
20、 capital tranches,and capital management requirements are comprehensively upgraded4243444China Banking Review 2023 1HChina Banking Review 2023 1H5Overview and OutlookThe banking industry,amongst all,faces these challenges directly and increases efforts to serve the real economy6China Banking Review
21、2023 1HOverviewIn the first half of 2023,despite the complex and severe international environment,Chinas economy continued to recover and was overall stable.However,there are new difficulties and challenges such as insufficient domestic demand,operational difficulties for some enterprises and hidden
22、 risks in key sectors.The foundation for sustained economic recovery and development still needs to be solid.In the first half year,Chinas economic task adhered to the general tone of seeking progress while maintaining stability,and amplified control over macroeconomic adjustments,focusing on stabil
23、ising growth,employment and prices.According to the National Bureau of Statistics,Chinas Gross Domestic Product(GDP)in the first half of 2023 reached RMB 59,303.4 billion,represented a YoY 5.5%increase,or a 1.0 percentage point faster than that in the first quarter.The National Consumer Price Index(
24、CPI)rose by 0.7%YoY,0.6 percentage point lower than that in the first quarter.The Producer Price Index(PPI)dropped by 3.1%YoY,1.5 percentage points higher than that in the first quarter.From the perspective of the three major needs that drive economic growth,the total retail sales of consumer goods
25、increased 8.2%YoY in the first half of 2023,2.4 percentage points faster than that of the first quarter;the growth of investment in fixed assets slowed down,increased by 3.8%YoY,1.3 percentage points lower than that of the first quarter;the total value of imports and exports goods increased by 2.1%Y
26、oY,lower than the 4.8%growth rate in the first quarter.It shows that the endogenous driving force of the economy needs to be strengthened despite the weakening of external demands.6Figure 1:Comparison of YoY GDP growth rate and net profit growth rate of listed banksSource:National Bureau of Statisti
27、cs,PwC research13.0%8.4%2.5%3.0%5.5%12.72%11.08%6.27%7.99%3.49%2021年上半年2021年全年2022年上半年2022年全年2023年上半年GDP增速上市银行净利润增速2022Net profit growth rate of listed banks2021 1H20212022 1H2023 1HGDP growth rateChina Banking Review 2023 1H7Financial support for the real economy steadily increasedIn the first half
28、 year,On the basis of maintaining prudent monetary policy,the Peoples Bank of China(PBOC)leveraged comprehensive monetary policy tools to guide financial institutions to stabilise credit and support the real economy while promote high-quality economic operation from three perspectives:total GDP,econ
29、omic structure and prices.PBOC increased the market liquidity through reserve requirement ratio(RRR)cuts and open market operation to support the steady growth of total credit.In March 2023,PBOC reduces the RRR of financial institutions by 0.25 percentage points.By the end of June 2023,the broad mon
30、ey(M2)supply and aggregate social financing increased by 11.3%and 9.0%YoY respectively.In the first half year,RMB loans increased by RMB 15.73 trillion,increased by nearly RMB 2 trillion YoY.The credit scale maintained a reasonable growth.The credit structure continued to be optimised.Structural mon
31、etary tools were continuously applied to increase support for key areas and weak links such as inclusive finance,technological innovation,green development.There were continuing efforts to extend inclusive small and micro loans and guaranteed housing loans to support small and micro businesses,and t
32、o ensure the delivery of pre-sold homes.Medium and long-term loans for manufacturing and infrastructure industries,loans to medium and small enterprises that specialise in niche sectors,command a high market share and have strong innovative capacity and core technologies,and inclusive financing loan
33、s to small and micro businesses outperformed all loans in YoY growth rate.The interest rate of the loans decreased significantly.In the first half year,the loan prime rate(LPR)with 1-year maturity more than 5-year maturity both fell by 10 basis points,which promoting declines in corporate and househ
34、old financing costs while maintaining an overall stability.According to PBOC,the weighted average interest rate of new corporate loans in the first half year was 3.96%,25 basis points lower YoY,and the weighted average interest rate of new individual housing loans was 4.18%,107 basis points lower Yo
35、Y.The private economy constitutes an important foundation for high-quality development.Pursuant to the Opinions on Promoting the Development and Growth of the Private Economy jointly released by the Central Committee of the Communist Party of China and the State Council on 14 July,financial authorit
36、ies followed the provisions thereout,provided sustained and improved financial services and optimised the financing environment for private enterprises.The banking industry has taken a wide range of measures to support the private economy,such as increasing credit support,reducing financing costs,re
37、ducing fees,and promoting innovation in financial products and services.Source:PBOC,PwC research9.6712.0912.7613.6815.738.5%11.1%8.6%11.4%11.3%0.0%3.0%6.0%9.0%12.0%051015202019年1-6月2020年1-6月2021年1-6月2022年1-6月2023年1-6月新增人民币贷款M2增速Figure 2:Trends of M2 and new RMB loansRMB trillionNew RMB loansM2 growt
38、h rateJan.to June 2019Jan.to June 2021Jan.to June 2022Jan.to June 2023Jan.to June 20208China Banking Review 2023 1HStrengthen risk prevention and control2023 is the first year to fully implement the guiding principles of the 20th CPC National Congress.In the first half year,the National Administrati
39、on of Financial Regulation(NAFR)was officially set up on the basis of the former China Banking and Insurance Regulatory Commission(CBIRC),marking an important step in the countrys institutional reform on financial supervision.The new financial regulator continues to implement major tasks of serving
40、the real economy,deepening financial supply-side reforms and preventing and controlling financial risks.The banking industry insists on promoting high-quality development by increasing support for private and small and micro businesses,scientific and technological innovation and green development,su
41、pporting rural revitalisation,and improving risk management.In the first half year,the former CBIRC and PBOC jointly formulated the Measures for the Risk Classification of Financial Assets of Commercial Banks and the Administrative Measures for the Capital of Commercial Banks(Exposure Draft).These m
42、easures are designated to improve risk measurement and strengthen risk prevention and control in the banking industry thus to ensure a sound operation of the industry.According to NAFR,by the end of June,the main risk-based regulation indicators of the banking industry had fallen into a reasonable r
43、ange.Specifically,the total assets of financial institutions increased by 10.4%YoY;the NPL ratio of commercial banks was 1.62%,down by 0.05 percentage point YoY;and the provision coverage ratio was 206.13%,representing an increase of 2.35 percentage points YoY.Strengthening measures to prevent and r
44、esolve local debt risks should be put in place.During the meeting of the Political Bureau of the Communist Party of China(CPC)Central Committee held on 24 July,a package of measures was formulated to defuse the risks of local government debts.The financialauthorities adhered to the spirit of the mee
45、ting.They coordinated financial support to deal with local debt,and thoroughly implemented enriched tools and measures to prevent and resolve debt risks.Emphasised financial efforts to support a stable and healthy development of the real estate sector.PBOC and NAFR released 16 financial policies to
46、support the development of the real estate sector in November 2022,and extended the implementation timeline of two of these policies to July 2023,with a view to ensure reasonable and moderate real estate financing while increase financial supports for the delivery of pre-sold homes.In addition,regul
47、ators continued to adjust and optimise the real estate credit policy.In August 2023,the policy to recognise households with mortgage records but no local property ownership as first-time homebuyers was included in the“One city,one policy”approach.On 31 August,PBOC and NAFR announced that the housing
48、 loan interest rates would be reduced starting from 25 September 2023,and the existing differential housing credit policies would also be adjusted and optimised.Furthermore,efforts should be made to support the implementation of the“One city,one policy”approach according to each citys own conditions
49、,and guide to lower interest rates and down payment ratio for individual housing loans.China Banking Review 2023 1H8China Banking Review 2023 1H9Profit growth of listed banks slowed down,while total assets continued to growIn the first half of 2023,listed banks thoroughly implemented the national ma
50、croeconomic policies,persisted in making progress while maintaining stability,and contribute to high-quality economic development.In terms of profitability,the total net profit of 58 listed banks increased by 3.49%YoY in the first halfyear,representing a lower YoY growth rate,and the profit before p
51、rovisions decreased by 1.78%YoY.Both the average return on assets(ROA)and the weighted average return on equity(ROE)of listed banks declined.In the first half year,the total assets of 58 listed banks amounted to RMB 286.15 trillion,representing an increase of 8.19%over the end of 2022 and a slight r
52、ise from the increase of 8.02%in the first half of 2022.Listed banks continued to maintain growth in new loans.Balance of customer loans grew to RMB 158.83 trillion,an increase of RMB 11.58 trillion,or 7.86%from that as at the end of 2022.In terms of asset quality,the NPL balance of listed banks ove
53、rall increased,with the NPL ratio fell from the beginning of the year.The provision coverage ratio continued to rise,and the provision-to-loan ratio remained stable.By the end of June,the total liabilities of listed banks amounted to RMB 263.88 trillion,representing an increase of 8.65%from the end
54、of the previous year.Deposits remained the major composition of liabilities.The customer deposit balance of listed banks was RMB 200.47 trillion,representing an increase of 9.24%from the end of the previous year.In the same period,the CAR of listed banks saw an overall downward trend.Less capital co
55、uld be raised,with internal capital replenishment being the main source.10China Banking Review 2023 1H10China Banking Review 2023 1HOutlookLooking ahead into the future,the external environment remains complex and challenging.The global economic growth is slowing down and the road to recovery is tor
56、tuous with increasing divergences in different regions.The cumulative effect of interest rate hikes in some developed economies on the global economy and financial market will continue to emerge.The domestic economy is facing new difficulties and challenges.The endogenous driving force for economic
57、recovery needs to be improved,consumption still needs to be boosted,and investor confidence needs to be further enhanced.Recently,domestic policies have focused on expanding domestic demand,boosting consumer and investor confidence,preventing and resolving financial risks in key areas,and promoting
58、sustained and stable economic performance.As the banking sector typically lags behind the overall macroeconomic cycle,it is anticipated that the banking sector will continue to face pressures and challenges in the second half of the year.On the one hand,commercial banks will continue to enhance thei
59、r capacity to serve the real economy by supporting the transformation,upgrade,and technological innovation,comprehensively deepening digital transformation,expanding the coverage of and access to financial services.On the other hand,they shall consider reducing service costs,improving asset quality,
60、strengthening risk prevention and control capabilities,and ensure that no systemic risks arise.Future major trends in the banking sector include:Improve the quality and efficiency of serving the real economy.Banks will prioritise financial support for key areas such as inclusive finance,private,smal
61、l and micro enterprises,advanced manufacturing,strategic emerging industries,and green finance in accordance with national policies;grant more retail loans to boost consumption in China;and intensify financial support to rental housing,urban village reconstruction,and government-subsidised housing t
62、o maintain stable and orderly real estate financing.Continuously strengthen risk prevention and control.The banking sector should comprehensively strengthen risk management,and enhance the foresight,comprehensiveness,and initiative of risk prevention and control.Efforts should be intensified in hand
63、ling distressed assets,closely monitoring risks related to real estate and local government loans,conducting ongoing stress tests,dynamic monitoring,warning,and control of risks to ensure that responsibilities of risk management are well-defined.Banks can leverage policy benefits such as the pilot p
64、rogram for the transfer of retail NPL,to manage and resolve risks associated with NPL in a timely manner.Properly address pressure on net interest margin.Affected by factors such as support to the real economy and the decline in market interest rates,coupled with the specific rules for adjusting int
65、erest rate of outstanding housing mortgage by commercial banks in the second half of the year,banks will continue to encounter downward pressure on net interest margin and profit.Banks are required to further strengthen their asset-liability management,improve funding cost management of liabilities
66、and stabilise net interest margin and net interest income.China Banking Review 2023 1H11Expand non-interest income.With net interest income under pressure,expanding non-interest income became a key driver for banks or banks to stabilise profitability.Banks should strengthen customer management,impro
67、ve financial services for key customers and key scenarios,improve product capabilities and continue to make efforts in areas such as wealth management,asset securitisation,derivatives,payment and settlement to expand business growth.Promote steady transformation of integrated operation.During the ph
68、ase of high-quality development,creating multiple profit growth drivers through integrated operation transformation will become one of the important ways to enhance customer service capabilities.In the future,large banks can expand their financial licenses based on their own characteristics and adva
69、ntages,and improve service capabilities in wealth management,financial leasing,consumer finance,and investment banking.Small and medium sized banks can align internal lines of business based on the comprehensive needs of customers to build a Value-Creating Bank in an all-round direction.Promote digi
70、tal transformation.Banks are required to further empower their operation and management with technology,continue to promote comprehensive digital transformation,improve data governance capabilities,strengthen data security and privacy protection,and improve operational efficiency.With the introducti
71、on of accounting policies to account for data resources,banks are required to improve the relevance of accounting information,reflect the value of data assets,seize market opportunities and expand new scenarios for data business.Advance sustainable development strategy and improve internal governanc
72、e.With the new disclosure standards of the International Sustainability Standards Board(ISSB)released recently,in order to further implement the requirements of the Green Finance Guidelines for the Banking and Insurance Industries,banks should continue to improve internal governance,prepare to adopt
73、 international standards,start key works such as carbon emission calculation for investment and financing,climate risk assessment and build corresponding sustainable information disclosure capabilities.China Banking Review 2023 1H1112China Banking Review 2023 1HIOperational PerformanceChina Banking
74、Review 2023 1HChina Banking Review 2023 1H134.78%8.25%-0.69%2.49%6.27%0.50%5.07%-7.57%-1.78%3.49%2022 1H2023 1HThe growth rate of operating income fell significantly,and profit before provision declinedIn the first half of 2023,the overall operating income of Chinas 58 listed banks increased 0.50%Yo
75、Y,representing a much lower growth rate than 2022 due to factors such as continuous support to the real economy and the overall decline in market interest rates.Operating and management expenses increased by 5.07%YoY,and profit before provision decreased by 1.78%.The total provision for credit impai
76、rment losses decreased by 7.57%YoY,alleviated the pressure of declining operating income on net profit,and net profit increased by 3.49%YoY.1.Revenue growth was under pressure,profit before provision fellFigure 3:Analysis of the YoY growth rate of net profit of listed banks in the first half of 2023
77、Operating incomeProfit before provisionOperating and management expensesImpairment losses on credit assetsNet profit4.29%0.85%12.68%-1.30%-4.30%21.75%2022 1H2023 1HFigure 4:Analysis of the YoY growth rate of operating income of listed banks in the first half of 2023Net interest incomeNet fee incomeO
78、ther net non-interest income*Other net non-interest income includes investment income,gains or losses from fair value changes,exchange gains or losses,other operating income and expenses,etc.China Banking Review 2023 1H14China Banking Review 2023 1HThe net profit of large commercial banks increased
79、by 3.10%YoY,the growth rate dropped by 2.29 percentage points from the same period last year;the profit before provision of large commercial banks decreased by 0.78%YoY,of which two banks net profit before provision increased due to the contribution of non-interest income.Affected by the narrowing o
80、f interest spreads,the profit before provision of the remaining 4 banks fell compared with the same period last year.Figure 7:Net profit and profit before provision growth of city and rural commercial banksFigure 6:Net profit and profit before provision growth of joint-stock commercial banks10.08%-7
81、.78%14.40%5.52%1.93%20.03%11.35%2.34%1.03%-5.14%2021 1H2019 1H2020 1H2022 1H2023 1H5.13%4.98%14.00%12.19%8.32%26.71%9.47%5.64%5.19%0.88%Growth of net profitGrowth of profit before provision2021 1H2019 1H2020 1H2022 1H2023 1H5.81%-11.16%11.75%5.39%3.10%8.84%4.20%5.56%2.54%-0.78%2019 1H2020 1H2021 1H2
82、022 1HFigure 5:Net profit and profit before provision growth of large commercial banks2023 1HThe net profit of joint-stock commercial banks increased by 1.93%YoY,the growth rate dropped by 3.59 percentage points from the same period last year,of which 4 banks net profit dropped YoY due to decrease i
83、n net interest income;profit before provision of joint-stock commercial banks decreased by 5.14%YoY,with all 10 banks recorded YoY decrease.The net profit of city and rural commercial banks increased by 8.32%YoY,the growth rate dropped 3.87 percentage points from the same period last year.Compared w
84、ith large commercial banks and joint-stock banks,although the growth rate of net profits of city and rural commercial banks has slowed down,they still maintain relatively high growth.Profit before provision increased by 0.88%,and the growth rate decreased 4.31%from the same period last year.From the
85、 geographical distribution perspective,the net profit of city and rural commercial banks in the Yangtze River Delta area increased by 15.46%YoY,and the average profit before provision increased by 3.01%YoY,higher than the industry average level.China Banking Review 2023 1HChina Banking Review 2023 1
86、H151.12%0.91%0.93%0.89%0.81%1.04%0.86%0.90%0.90%0.85%0.86%0.84%0.84%0.84%0.82%2019 1H2020 1H2021 1H2022 1H2023 1HReturn on total assets(ROA)Large commercial banksJoint-stock commercial banksCity and rural commercial banksIn the first half of 2023,profitability indicators of 58 listed banks showed a
87、downward trend.The average ROA of both joint-stock commercial banks,and city and rural commercial banks dropped,with large commercial banks experiencing the largest decline.The weighted average ROE of listed banks continued to decline,and the growth rate of net profit was lower than the growth rate
88、of net assets.Figure 8:Trends in profitability indicators of listed banks14.71%11.78%12.29%11.87%11.25%14.74%11.80%12.41%12.17%11.53%20.50%16.61%16.47%14.03%12.94%Weighted average return on equity(ROE)Large commercial banksJoint-stock commercial banksCity and rural commercial banks2022 1H2023 1H2021
89、 1H2020 1H2019 1H2.Declined profitabilityChina Banking Review 2023 1H16China Banking Review 2023 1HFigure 9:Trends in the net interest spread and net interest margin of listed banks2.01%1.97%1.88%1.82%1.56%2.05%2.26%2.13%1.98%1.79%2.17%2.12%2.04%1.91%1.75%2019 1H2020 1H2021 1H2022 1H2023 1HNet inter
90、est spreadLarge commercial banksJoint-stock commercial banksCity and rural commercial banks2.13%2.11%2.03%1.95%1.71%2.11%2.33%2.19%2.09%1.87%2.14%2.16%2.07%2.01%1.82%2019 1H2020 1H2021 1H2022 1H2023 1HNet interest marginLarge commercial banksJoint-stock commercial banksCity and rural commercial bank
91、sIn the first half of 2023,net interest spread and net interest margin of listed banks generally showed a narrowing trend.The net interest spread and net interest margin of large commercial banks narrowed by 0.26 and 0.24 percentage points respectively compared with the same period in 2022;the two i
92、ndicators of joint-stock commercial banks narrowed by 0.19 and 0.22 percentage points respectively;and the two indicators narrowed by 0.16 and 0.19 percentage points for city and rural commercial banks respectively,with a more moderated decline in the second quarter.The net interest spread and net i
93、nterest margin of listed banks generally showed a narrowing trend.In the first half of 2023,the economy was on a recovery track.The LPR for loans with a maturity of 1-year and more than 5 years declined by 10 basis points.The banking industry reduced financing costs of enterprises and supported the
94、real economy,thus further drive down loan yields.From the perspective of the liability side,under the combined influence of moderately loose monetary policy and increase in the proportion of term deposits,the liability-side cost ratio declined slightly.3.Net interest spread and net interest margin c
95、ontinued to narrowChina Banking Review 2023 1HChina Banking Review 2023 1H176.00%0.33%4.16%-1.25%-3.45%2.77%Large commercialbanksJoint-stockcommercial banksCity and ruralcommercial banks2022 1H2023 1H1.18%-0.74%5.46%0.38%-9.84%-15.87%Large commercialbanksJoint-stockcommercial banksCity and ruralcomm
96、ercial banks2022 1H2023 1HFigure 10:Growth in net interest income of listed banksFigure 11:Growth in net fee and commission income of listed bankFigure 12:Growth in other non-interest income of listed banks5.58%21.97%28.40%34.09%11.61%15.36%Large commercialbanksJoint-stockcommercial banksCity and ru
97、ralcommercial banks2022 1H2023 1HIn the first half of 2023,the operating income of 58 listed banks increased by 0.50%YoY to RMB 3.07 trillion,which was significantly lower than the 4.78%growth rate in the same period last year.Net interest incomeNet interest income of listed banks decreased by 1.3%Y
98、oY.Affected by the decline in net interest margin,the net interest income of large commercial banks and joint-stock commercial banks decreased by 1.25%and 3.45%YoY respectively.The net interest income of city and rural commercial banks increased by 2.77%YoY,of which 22 banks increased and 20 banks d
99、ecreased.Net fee and commission incomeNet fee and commission income of listed banks decreased by 4.3%YoY.Affected by the continued fluctuations in the capital market and banks continued fee reductions and profit concessions,fee income from wealth management products decreased YoY.Specifically,large
100、commercial banks recorded basically the same figures as the same period last year,while joint-stock commercial banks and city and rural commercial banks dropped 9.84%and 15.87%YoY respectively.Other non-interest incomeOther non-interest income of listed banks increased by 21.75%YoY.In the first half
101、 of the year,gains from changes in fair value and investment income increased YoY due to factors such as improved market expectations,expected slowdown in US dollar interest rate hikes and recovery in the bond market.4.Net interest income,net fee and commission income decreased YoY,other non-interes
102、t income became the main source of revenue growth China Banking Review 2023 1H18China Banking Review 2023 1HIIAsset PortfolioChina Banking Review 2023 1HChina Banking Review 2023 1H19Table 1:Changes in total assets of listed banksSince 2023,the momentum of global economic recovery has weakened and t
103、he cumulative effects of rapid interest rate hikes in developed economies continue to emerge.Chinas economy continued to recover and was generally stable.However,it still faces challenges such as insufficient domestic demand,operating difficulties for some companies and latent risks in key areas.The
104、 foundation for sustained economic recovery and development still needs to be strengthened.Growth of total assets of listed banks further increased compared with the same period last year,which strongly supported the cultivation of endogenous economic growth momentum.At the end of June,the total ass
105、ets of listed banks increased by 8.19%compared with the end of 2022,maintaining a YoY increase on a high base,and is higher than the GDP growth rate,and the stability of credit growth was strengthened.Large commercial banks once again led the way in expansion of balance sheets,steadily playing the r
106、ole of bellwether.Joint-stock commercial banks grew faster than the same period last year,but due to capital constraints,the growth rate was lower than that of large commercial banks.In terms of asset structure,customer loans and financial investment of listed banks continued to grow,accounting for
107、a stable proportion of total assets.The growth of deposit and repurchase business of large commercial banks and joint-stock commercial banks has driven a short-term increase in the proportion of interbank assets.Total assets(RMB Trillion)2021 2H2022 1H2022 2H2023 1HLarge commercial banks145.44158.92
108、164.09179.98Joint-stock commercial banks59.3562.1863.7467.00City and rural commercial banks32.5635.2936.6539.17Total237.35256.39264.48286.15Half-year ring growthLarge commercial banks1.30%9.27%3.25%9.68%Joint-stock commercial banks3.25%4.77%2.51%5.11%City and rural commercial banks3.30%8.38%3.85%6.8
109、8%Total2.06%8.02%3.16%8.19%1.The growth rate of total assets has picked up and the stability of credit growth has been strengthenedChina Banking Review 2023 1HChina Banking Review 2023 1H20Figure 13:Changes in the asset structure of listed banks57%57%57%57%57%57%57%56%49%49%49%50%27%26%27%26%29%29%3
110、0%30%37%37%37%37%5%6%6%7%5%5%5%5%5%5%5%5%8%8%8%8%6%5%5%5%6%6%6%5%3%3%2%2%3%4%3%4%3%3%3%3%20212H20221H20222H20231H20212H20221H20222H20231H20212H20221H20222H20231HLarge commercial banksJoint-stock commercial banksCity and rural commercialbanksCustomer loansFinancial investmentInterbank assetsCash and
111、central bank depositsOther assets20China Banking Review 2023 1HChina Banking Review 2023 1H21Figure 14:Changes in the loan structure of listed banksIn the first half of 2023,customer loans of listed banks continues to grow.Total balance of customer loans amounted to RMB 158.83 trillion,representing
112、an increase of RMB 11.58 trillion,or 7.86%from the end of 2022.The growth rate significantly increased by 4.47 percentage points compared with that in the second half of 2022,and 0.15 percentage point higher than that of the same period of the previous year.Among them,large commercial banks achieve
113、the highest growth,followed by city and rural commercial banks and joint-stock commercial banks.In terms of loan structure,corporate loans increased by 13.52%,with an increase of 2.62 percentage points in the proportion,retail loans increased by 2.21%,with a decrease of 1.92 percentage points in the
114、 proportion,and discounted bills decreased by 10%,with a decrease of 0.89 percentage point in the proportion.59%60%60%62%33%31%31%29%7%8%8%7%1%1%1%1%2021 2H 2022 1H 2022 2H 2023 1HCity and rural commercial banks公司贷款零售贷款票据贴现其他55%56%56%59%39%37%36%34%2%3%4%3%3%3%3%4%2021 2H 2022 1H 2022 2H 2023 1HLarg
115、e commercial banks49%49%50%51%43%42%40%39%7%8%7%7%1%2%3%3%2021 2H 2022 1H 2022 2H 2023 1HJoint-stock commercial banks2.Corporate loans served as the growth engine,the relative proportion of retail loans continued to fallCorporate loansDiscounted billsRetail loansOthersChina Banking Review 2023 1H22C
116、hina Banking Review 2023 1HTable 2:Corporate loan growth of listed banks by industryFrom the perspective of investment direction,in the first half of 2023,loans to leasing,manufacturing,wholesale and retail industries grew at a rather high speed,supporting recoveries in investment in infrastructure,
117、high-tech manufacturing and consumption.In terms of promoting the development of the digital economy,loans to the information transmission,computer service and software industries increased by 23.19%.According to the China Monetary Policy Report released by the PBOC in the second quarter of 2023,the
118、 balance of medium and long-term loans in the manufacturing industry,green loans,and loans to small and medium enterprises that specialise in niche sectors,command a high market share and have strong innovative capacity and core technologies increased by 40.3%,38.4%and 20.4%YoY respectively at the e
119、nd of June,significantly higher than the overall growth rate of loans.In the first half of the year,the loan growth rate of real estate industry of listed banks rebounded to 4.24%,and its proportion to corporate loans decreased.Industry 2022 2HBalance(RMB Trillion)2023 1HBalance(RMB Trillion)2022 2H
120、Proportion 2023 1HProportion 2023 1HGrowth Leasing and business services14.41 16.71 17.88%18.26%15.96%Manufacturing13.63 16.26 16.91%17.77%19.30%Transportation,warehouse and postal services12.54 13.51 15.56%14.76%7.74%Real estate7.54 7.86 9.35%8.59%4.24%Water conservancy,environmental,and public fac
121、ilities management6.85 7.68 8.50%8.40%12.12%Electricity,gas and water production and supply5.97 6.80 7.40%7.43%13.90%Wholesale and retail5.69 6.63 7.06%7.24%16.52%Information transmission,computer service and software0.69 0.85 0.86%0.93%23.19%Subtotal(others)13.28 15.20 16.48%16.62%14.46%Total corpo
122、rate loans 80.60 91.50 100.00%100.00%13.52%3.Increased credit support for infrastructure,environmental and technological innovation China Banking Review 2023 1HChina Banking Review 2023 1H23China Banking Review 2023 1H23In the first half of 2023,the total retail loans of listed banks were RMB 56.65
123、trillion,an increase of 2.21%from the beginning of the year.On one hand,the scale of mortgage loans fell back.Affected by sluggish real estate sales and early prepayment by residents,the scale of mortgage loans fell by 0.40%in the first half of the year,with its proportion of total retail loans also
124、 fell by 1.67%.In the second half of the year,with the intensive implementation of real estate policies and adjustment measures in existing housing mortgage interest rates,mortgage loan demand is expected to rebound.On the other hand,the recovery in consumer demand is still insufficient.Consumption
125、demand is an important engine for smooth economic cycle.In the first half of the year,personal consumer loans of listed banks increased by 6.54%,reversing the rapid decline in the second half of 2022,but the scale has not yet returned to the same level of the same period in 2022.The scale of credit
126、card business decreased by 0.66%.It should be noted that the operation/business assistance loans to enterprises of listed banks increased by 15.38%,supported the overall growth of retail loans.business support loans mainly include agriculture-related loans,personal business assistance loans,and onli
127、ne loans for operation purposes.Commercial banks continue to increase credit support for economic recovery and rural revitalisation.Table 3:Balance of retail loan of listed banks2022 1HRMB 100 million2022 2HRMB 100 million 2023 1HRMB 100 million 2022 1HGrowth2022 2HGrowth2023 1HGrowthHousing mortgag
128、e 357,350 362,694 361,256 1.42%1.50%-0.40%Operation/Business assistance 69,827 75,760 87,409 13.04%8.50%15.38%Credit card 76,004 76,587 76,081 0.53%0.77%-0.66%Consumption 46,860 39,256 41,801 1.02%-16.23%6.54%Total550,041 554,297 566,547 2.60%0.77%2.21%4.Retail loan growth was sluggish,and consumer
129、and mortgage loan demands were insufficientFigure 15:Changes in the retail loan structure of listed banks66%65%65%64%8%8%7%7%12%13%14%15%14%14%14%14%2021 2H2022 1H2022 2H2023 1H住房按揭消费经营信用卡Housing mortgage ConsumptionOperationCredit card24China Banking Review 2023 1HThe scale of financial investment
130、of listed banks continued to grow,whilst maintaining a stable structure.Large commercial bank bonds accounted for over 90%,joint-stock commercial banks and city and rural commercial bank bonds accounted for around 70%.Other financial investments are mainly funds and alternative investment assets.In
131、the first half of the year,the increase in bond investment of listed banks was mainly contributed by government,financial institutions and policy bank bonds,and the growth rate of investment in corporate bonds was lower than the overall growth rate of financial investments.In July 2023,the Opinions
132、on Promoting the Development and Growth of the Private Economy by the Central Committee of the Communist Party proposed to improve the financing support policy for private enterprises,support qualified private small,medium and micro enterprises to raise funds in the bond market,encourage qualified p
133、rivate enterprises to issue sci-tech innovation corporate bonds,and promote the specialised support plan for private enterprise bond financing to expand coverage and enhance credit enhancement.Figure 16:Changes in the financial investment structure of listed banks39%40%8%9%10%9%12%12%13%12%15%13%4%4
134、%2022 2H2023 1HCity and rural commercial banks其他非标资产基金企业债券银行及非银金融机构债券政策性银行债券政府、公共实体及准政府债70%70%5%5%13%13%5%5%3%3%1%1%3%3%2022 2H2023 1HLarge commercial banks45%45%6%6%9%10%10%10%14%13%12%13%4%4%2022 2H2023 1HJoint-stock commercial banks5.Financial investment grew steadily,while the growth rate of cor
135、porate bonds was lower than the overallOthersAlternative investmentassetsFundsCorporate bondsBonds of banks and non-banking financial institutionsPolicy bank bondsGovernment,public entities and quasi-government bondsChina Banking Review 2023 1HChina Banking Review 2023 1H25IIIAsset QualityChina Bank
136、ing Review 2023 1H26China Banking Review 2023 1HRisk indicators of large commercial banks stabilisedThe NPL balance of large commercial banks increased by 7.33%from the end of 2022 to RMB 1.37 trillion,and the overdue loan balance increased by 7.11%to RMB 1.14 trillion.As the growth rates of both NP
137、L and overdue loan balances were lower than the overall loan growth rate,the NPL ratio and overdue loan ratio both decreased slightly by 0.02 percentage point to 1.31%and 1.08%respectively.The overdue loan ratio of large commercial banks continued to be lower than NPL ratio,the proportion of loans i
138、n the watch list and proportion of stage 2 loans also declined.The risk indicators stabilised and improved.However,it is still necessary to pay attention to the further downward pressure on asset quality that may be caused by counter-cyclical adjustments.Figure 17:Changes in NPL ratio,overdue loan r
139、atio,and ratio of loans in the watch list1.37%1.36%1.33%1.31%1.09%1.08%1.10%1.08%1.76%1.71%1.72%1.66%2021 2H2022 1H2022 2H2023 1HLarge commercial banksNPL ratioOverdue loan ratioRatio of loans in the watch listThe overdue loan ratios of joint-stock commercial banksgenerally declinedThe NPL balance o
140、f joint-stock commercial banks increased by 2.22%to RMB 490.9 billion,while theoverdue loan balance dropped by 0.46%to RMB 662.9 billion.The NPL ratio decreased slightly by 0.02percentage point compared with the end of last year to 1.28%,with the NPL loan ratio of all joint-stockcommercial banks fel
141、l between 0.95%to 1.85%.Overdue loan ratio also decreased slightly by 0.09percentage point to 1.72%.The overdue loan ratio was higher than the NPL ratio,but the differencewas narrowed.1.35%1.33%1.30%1.28%1.80%1.78%1.81%1.72%1.88%1.90%1.93%1.82%2021 2H2022 1H2022 2H2023 1HJoint-stock commercial banks
142、NPL ratioOverdue loan ratioRatio of loans in the watch listBy the end of June 2023,for the 58 listed banks:The overall ratio of loans in the watch list,overdue loan ratio and NPL ratio decreased by 0.07,0.04 and 0.02 percentage point respectively from the high points at the beginning of the year.In
143、addition,the write-off ratio of NPL and scale of transfer decreased over the same period.Various risk indicators and risk compensation capabilities remained stable.Commercial banks should pay attention to impact of the lag in corporate risk exposure on risk indicators due to the incremental investme
144、nt of assets.In addition,as the NPL ratio of retail business continues to grow,commercial banks should carefully identify customer credit risks and their risk changes,to pursue asset increments while prevent risks in advance.1.Increased credit issuance,risk indicators remained stable but under press
145、ureChina Banking Review 2023 1HChina Banking Review 2023 1H27The overdue loan ratio of some city and rural commercial banks increased rapidly,and the NPL ratio became polarised1.41%1.40%1.37%1.35%2.18%2.36%2.23%2.24%2.03%2.01%2.08%2.00%2021 2H2022 1H2022 2H2023 1Hcity and rural commercial banksNPL r
146、atioOverdue loan ratioRatio of loans under watch listFigure 18:Changes in NPL ratio,overdue loan ratio,and ratio of loans under watch listThe overdue loan ratio of city and rural commercial banks continued to be higher than the ratio of loans under watch list and NPL ratio,and the overdue loan ratio
147、 of some banks were rising rapidly.Thus attention should be paid to the risk exposure and the transmission risk of regional banks.The NPL balance of city and rural commercial banks increased by 6.56%to RMB 271.4 billion,while the NPL ratio decreased by 0.02 percentage point.The overdue loan balance
148、increased by 8.39%to RMB 448.8 billion,while the overdue loan ratio increased by 0.01 percentage point.The difference between overall NPL ratio and overdue loan ratio increased by 0.03 percentage point in the first half of 2023.2.Asset quality of regional banks continued to divergeChina Banking Revi
149、ew 2023 1H2728China Banking Review 2023 1HNPL ratios were diverging.Among the 42 listed city and rural commercial banks,at the end of June 2023,8 banks had a NPL ratio of more than 2%(compared to 5 banks with a NPL ratio of over 2%at the end of the last year.The regional distribution is more dispers
150、ed,and the risk indicators of different banks in the same region also diverge.In this period,the number of city and rural commercial banks with a non-performing rate below 1%increased from 1 to 15,and they are still concentrated in the Yangtze River Delta region and the Chengdu-Chongqing Economic Zo
151、ne.The trend of overdue loan ratio of city and rural commercial banks diverges significantly.Among the 42 listed city and rural commercial banks,the overdue loan ratio of 21 banks increased and 21 banks decreased.The overdue loan ratio of 4 banks increased by 0.50 percentage points in the first half
152、 of 2023,There was an increased pressure on risk exposure.The regional differentiation of risk indicators for city and rural commercial banks continued.The NPL ratio and overdue loan ratio have increased in the central region,the north-eastern region,and Pearl River Delta region,while the ratios hav
153、e decreased in the Yangtze River Delta region,the Chengdu-Chongqing Economic Circle,the western region and the Bohai Rim region.Number of banksNPL ratioOverdue loan ratioRatio of loans under watch listYangtze River Delta150.96%(-3bp)1.11%(-5bp)1.01%(-3bp)Central61.88%(+9bp)2.98%(+6bp)2.99%(-14bp)Boh
154、ai Rim Region61.46%(-4bp)1.85%(-39bp)2.04%(-23bp)Pearl River Delta31.62%(+6bp)3.35%(+45bp)4.29%(-63bp)Chengdu-Chongqing Economic Circle41.06%(-7bp)1.50%(-3bp)1.44%(-5bp)Western51.54%(-3bp)2.99%(-11bp)3.59%(+13bp)Northeast32.96%(+2bp)9.90%(+154bp)4.15%(+72bp)Total421.35%(-2bp)2.24%(+1bp)2.00%(-8bp)Ta
155、ble 4:Proportion of NPL ratio,overdue loan ratio and ratio of loans under watch list among 42 city and rural commercial banks by regionNote:Yangtze River Delta-Shanghai,Jiangsu,Zhejiang and Anhui;Central China:Hunan,Henan,Jiangxi and Shanxi;Bohai Rim Region:Beijing,Tianjin and Shandong;Pearl River D
156、elta:Shenzhen,Fujian and Guangdong;Chengdu-Chongqing Economic Circle:Sichuan and Chongqing;Western China:Guizhou,Shaanxi and Gansu;Northeast China:Liaoning,Heilongjiang and JilinChina Banking Review 2023 1HChina Banking Review 2023 1H29Corporate loans:As of the end of June 2023,the corporate NPL bal
157、ance of listed banks was RMB 1.44 trillion,an increase of 4.71%from the end of previous year.The NPL ratio was 1.61%,down 0.14 percentage points from the end of last year.The NPL ratios of all types of banks corporate business declined.Retail loans:At the end of June,the NPL retail loans of listed b
158、anks were RMB 536.6 billion,an increase of 7.66%from the end of the previous year.The overall NPL ratio of retail loans was 0.93%,an increase of 0.04 percentage points from the end of the previous year.The NPL ratio of all types of banks increased compared with the end of the previous year,and the i
159、ncrease in the NPL ratio of city and rural commercial banks was more significant than that of others.From the perspective of business types,affected by the pandemic and the downturn of the real estate market,the NPL ratios of personal mortgage,consumer and credit card businesses of listed banks all
160、increased compared with the previous year.3.The quality of corporate assets continued to improve and the retail NPL ratio increased significantlyChina Banking Review 2023 1H2930China Banking Review 2023 1H1.99%1.92%1.82%1.65%1.84%1.42%1.55%1.46%1.94%1.71%1.73%1.62%Corporate loans大型商业银行股份制银行城农商行0.54%
161、0.64%0.68%0.72%1.14%1.04%1.25%1.27%1.07%1.26%1.42%1.58%Retail loans大型商业银行股份制银行城农商行Note:The data excludes banks that do not differentiate between the NPL balances of corporate and retail business.Discounted bills are excluded from the calculation of corporate NPL ratio.Figure 19:NPL ratios of corpora
162、te and retail loans of listed banks2021 2H2022 1H2022 2H2023 1H2021 2H2022 1H2022 2H2023 1HLarge commercial banksJoint-stock commercialbanksCity and rural commercialbanksJoint-stock commercialbanksCity and rural commercialbanksLarge commercialbanksChina Banking Review 2023 1H31Share of real estate l
163、oans decreased,NPL ratios of major banks fell back and the combination measures to stabilise the real estate industry continued to impactAt the end of June 2023,the scale of loans to the public real estate industry by 58 listed banks was approximately RMB 7.86 trillion,accounting for 8.59%of the tot
164、al public loans,a decrease of 0.76 percentage points from the end of 2022.The overall NPL ratio of corporate real estate loans was 4.20%,an increase of 0.17 percentage points from the end of the previous year.The NPL ratio of large commercial banks fell back from its high point,and the risks of join
165、t-stock commercial banks and city and rural commercial banks continued to be exposed.In terms of policies,various housing policies aimed to optimise and make timely adjustments were enacted in the second half of 2023.Such policies includes first-tier cities recognition of houses but not loans,the un
166、ified lower limit of down payment ratio for first and second homes nationwide to 20%and 30%,adjustment of existing mortgage interest rates,promotion of special refinancing for housing companies to bail out,etc.In addition,the Peoples Bank of China and the State Financial Supervision Administration i
167、ssued an extension on July 10 to extend the application period of the 16 Financial Articles related policies on real estate,which will help alleviate concerns that real estate risk exposure will have a further negative impact on bank asset quality indicators.Table 5:Changes in corporate real estate
168、loans of listed banksCorporate real estate loans2021 2H2022 1H2022 2H2023 1HChanges in current periodVolume(RMB Trillion)Large commercial banks3.513.723.844.096.51%Joint-stock commercial banks2.572.562.522.551.19%City and rural commercial banks1.071.161.171.225.13%Business proportionLarge commercial
169、 banks8.06%7.69%7.60%6.99%-0.61%Joint-stock commercial banks15.15%14.14%13.47%12.56%-0.91%City and rural commercial banks10.99%10.49%10.35%9.68%-0.67%NPL ratioLarge commercial banks3.29%3.97%5.15%5.02%-0.13%Joint-stock commercial banks1.79%2.32%2.91%3.42%0.51%City and rural commercial banks2.10%2.36
170、%2.51%2.80%0.29%Note:The industry distribution of certain listed banks corporate loans is based on the balance of domestic banks.Banks thathave not disclosed the industry distribution of NPLs are excluded.32China Banking Review 2023 1H3.23%3.23%3.17%3.17%2.89%2.89%2.86%2.86%3.71%3.68%3.63%3.60%2021
171、2H2022 1H2022 2H2023 1HLoan-to-Provision Ratio大型商业银行股份制银行城农商行236.46%238.34%238.86%243.01%214.84%217.70%219.55%224.21%262.78%263.76%264.64%266.30%2021 2H2022 1H2022 2H2023 1HProvision Coverage Ratio大型商业银行股份制银行城农商行Encourage the mitigation of local government debt risksFigure 20:Changes in loan-to-prov
172、ision ratios and provision coverage ratios of listed banksAccording to the Report of the State Council on the Implementation of Budgets for 2023 deliberated at the fifth session of the Standing Committee of the 14th National Peoples Congress on 28 August 2023,the central government actively supports
173、 local governments in mitigating hidden debt risks.A package of debt risk mitigation plans have been introduced to urge local governments to coordinate available funds,assets,resources and implement supportive policies and measures.A closer attention has been paid to municipal and county governments
174、 to properly resolve existing hidden debts,optimise the maturity structure,reduce interest burdens,and gradually mitigate debt risks.Some listed banks have disclosed information of its exposure and asset quality of local financing platforms.Their overall proportion of local financing loas of corpora
175、te loans is 4%-5%,and the non-performing rate is within 1.5%.Banks will actively and steadily handle local debt risks under the guidance of regulatory authorities.As of the end of June 2023,the overall loan-to-provision of listed banks was 3.15%,which was basically the same as the end of the previou
176、s year.The provision coverage ratio was 241.64%,an increase of 4.14 percentage points from the end of last year.Commercial banks should pay attention to the impact of the Measures for the Risk Classification of Financial Assets of Commercial Banks on NPL scale and ratio.In the first half of the year
177、,the scale of write-off and transfer of non-performing assets of listed banks decreased YoY.NPL write-off and transfer-out amounted to RMB 413.3 billion,a decrease of 1.55%from 2022 1H.The amount of write-off and transfer-out of joint-stock commercial banks increased by 2.71%compared with 2022 1H,wh
178、ile the amounts written-off and transferred out by large commercial banks and city and rural commercial banks decreased by 3.01%and 10.83%,respectively.The overall loan-to-provision ratio remained stable,the provision coverage ratio increased,representing a robust risk resistance capabilityCity and
179、rural commercialbanksJoint-stock commercialbanksLarge commercialbanksLarge commercialbanksJoint-stock commercialbanksCity and rural commercialbanksChina Banking Review 2023 1H33China Banking Review 2023 1H334.Focus to the impact of new regulations on financial asset classification and improve the ab
180、ility to forecast credit risksPwC further interpretated the Measures for the Risk Classification of Financial Assets of Commercial Bank issued by the former CBIRC and the PBOC in February 2023.For details,please refer to“Column II:Promoting risk resolution through classification-Interpretation of ri
181、sk classification management measures for commercial banks”in PwCs China Banking Review 2022.The newly added stage three assets is similar to non-performing assets.The measures will officially take effect from July 2023.As stipulated in Article 11,the credit-impaired“stage 3”financial assets should
182、be at least classified as substandard,while the volume of non-performing assets and stage 3 loans will further converge.There are still differences in stages and classifications of existing assets.There is a certain degree of difference between the scale of stage 3 impaired loans and the scale of NP
183、L of some joint-stock commercial banks and city and rural commercial banks.In the first half of the year,the overall differences between joint-stock commercial banks and city and rural commercial banks expanded.According to the above regulatory requirements,banks need to gradually complete reclassif
184、ication before the end of 2025.It is expected that the scale of banks NPLs will continue to be under pressure.In addition,we also observed that differences between stage 2 loans(“loans with significantly increased credit risk”)and loans under the watch list of joint-stock commercial banks and city a
185、nd rural commercial banks were growing in the first half of the year,reflected the fact that the staging was ahead of five-level classification adjustment.China Banking Review 2023 1H3334China Banking Review 2023 1HFigure 22:NPL ratios and stage 3 loans of listed banksNote:Banks that have not disclo
186、sed staging are excluded.1.35%1.34%1.33%1.30%1.69%1.73%1.72%1.72%City and rural commercial banks不良率阶段三占比1.37%1.36%1.33%1.31%1.36%1.36%1.33%1.30%Large commercial banks1.38%1.36%1.33%1.30%1.44%1.50%1.49%1.51%Joint-stock commercial banks20212H20221H20222H20231H20212H20221H20222H20231H20212H20221H20222H
187、20231HFigure 21:Special mention loan ratios and stage 2 loans of listed banks1.85%1.83%1.92%1.81%3.27%3.37%3.25%3.28%City and rural commercial banks关注率阶段二占比1.76%1.71%1.72%1.66%2.15%2.05%2.34%2.24%Large commercial banks1.92%1.96%1.94%1.83%2.77%2.71%2.91%2.96%Joint-stock commercial banks20212H20221H20
188、222H20231H20212H20221H20222H20231H20212H20221H20222H20231HBanks should pay close attention to loans whose stage classification is made earlier than the five-level classification adjustment and their potential impact on regulatory indicators.More efforts should be made to strengthen the collection an
189、d disposal of such loans,resolve the risks of such loans in a timely manner,and ensure that regulatory requirements are met at the end of the transition period.Rate of loans under watch listRate of stage 2 loansNPL ratioRate of stage 3 loansChina Banking Review 2023 1H35China Banking Review 2023 1H3
190、5IVLiabilities and Wealth Management Business36China Banking Review 2023 1HTotal liabilities2021 2H2022 1H2022 2H2023 1HVolume(RMB Trillion)Large commercial banks133.04146.10150.60166.10Joint-stock commercial banks54.4357.1658.4661.58City and rural commercial banks29.8832.5933.8136.20Total217.35235.
191、85242.87263.88Half-year ring growthLarge commercial banks0.88%9.82%3.08%10.29%Joint-stock commercial banks2.52%5.02%2.27%5.34%City and rural commercial banks2.86%9.07%3.74%7.07%Total1.56%8.51%2.98%8.65%Figure 23:Changes in the liability structure of listed banksAt the end of June 2023,the total liab
192、ilities of listed banks were RMB 263.88 trillion,an increase of RMB 21.01 trillion and an increase of 8.65%from the end of 2022.In terms of liability structure,customer deposits are still the main source of funds for listed banks.The proportion of deposits of large commercial banks and city and rura
193、l commercial banks has increased,while the proportion of interbank liabilities has decreased.Table 6:Growth in total liabilities of listed banks81%80%80%81%64%66%66%66%67%69%68%69%9%10%10%9%18%17%18%17%12%11%13%12%5%5%5%5%13%13%12%12%14%13%13%12%2%2%2%2%4%4%3%2%5%4%4%4%3%3%3%3%2%2%2%3%1%2%2%2%20212H
194、20221H20222H20231H20212H20221H20222H20231H20212H20221H20222H20231H客户存款同业负债应付债券央行借款其他负债Large commercial banks Joint-stock commercial banks City and rural commercial banks1.Scale of liabilities continued to grow,and the proportion of customer deposits increasedCustomer depositsInterbank liabilitiesBon
195、ds payableBorrowings from the Central BankOthersChina Banking Review 2023 1H37At the end of June 2023,the customer deposit balance of listed banks was RMB 200.47 trillion,an increase of 9.24%from the end of 2022,of which the growth rate of deposits of large commercial banks reached 10.37%.The growth
196、 rate of time deposits accelerated to 14.83%,which was significantly higher than the overall deposit growth rate.The proportion of time deposits continued to increase to 58%,with large commercial banks and city and rural commercial banks seeing significant growth,and the trend of regular time deposi
197、ts continued.In the first half of the year,residents willingness to save continued to rise,retail deposits grew to RMB 95.79 trillion,approaching to the scale of corporate deposits.Retail deposits of joint-stock commercial banks and city and rural commercial banks raised marginally.In the second hal
198、f of the year,with the reduction of deposit interest rates,banks will increase their efforts to expand sources of low-cost funding,optimise deposit structures,and further promote the reduction of deposit costs.Figure 24:Changes in deposit balances and the proportion of time deposit of listed banksRM
199、B trillion2.Scale of deposits increased significantly,and the proportion of fixed-term and retail deposits increased51%53%54%57%53%55%56%56%60%62%63%65%103.8749%113.7447%117.0646%129.9443%33.2747%36.1545%36.7244%39.1844%19.1740%21.2738%21.6437%23.5535%20212H20221H20222H20231H20212H20221H20222H20231H
200、20212H20221H20222H20231H定期存款活期存款Large commercial banks Joint-stock commercial banks City and rural commercial banks*Note:Deposit balances in the above figure exclude interest payable.Time depositsDemand deposits38China Banking Review 2023 1H55%53%50%49%40%41%43%45%6%6%7%6%20212H20221H20222H20231H公司存
201、款零售存款其他存款City and rural commercial banks4.23%13.92%4.25%11.50%-1.81%6.45%-2.35%4.18%1.96%11.32%2.43%8.33%2021 2H2022 1H2022 2H2023 1H定期存款增速活期存款增速存款增速3.10%11.93%4.97%6.09%2.69%4.98%-2.49%7.49%1.94%8.88%1.70%6.17%2021 2H2022 1H2022 2H2023 1H1.11%14.48%4.35%18.44%-1.56%4.39%1.31%2.38%0.38%9.14%4.19%10.
202、37%2021 2H2022 1H2022 2H2023 1HLarge commercial banksJoint-stock commercial banksCity and rural commercial banksFigure 26:Changes in deposits growth rates of listed banks44%44%42%43%53%53%55%54%3%3%3%3%20212H20221H20222H20231HLarge commercial banks72%71%68%67%24%25%28%29%4%4%4%4%20212H20221H20222H20
203、231HJoint-stock commercial banksFigure 25:Changes in the deposit structure of listed banksDemand deposit growth rateTime deposit growth rateDeposit growth rateCorporate depositsRetail depositsOthersChina Banking Review 2023 1H39Figure 27:Comparison between wealth management products and public funds
204、Source:Semi-annual Report on Chinas Banking Wealth Management Market(2023 1H),Annual Report onChinas Banking Wealth Management Market(2022),Semi-annual Report on Chinas Banking WealthManagement Market(2022 1H),and the Asset Management Associationof China26.7926.0327.6929.1527.6525.3419.1466%22.2480%
205、20.6782%10.0134%5.4120%4.6718%2022 1H2022 2H2023 1HNet value of public fundsWealth management subsidiariesBanks and othersAccording to the Semi-annual Report on Chinas Banking Wealth Management Market(2023 1H),as of the end of June 2023,the existing scale of wealth management products was RMB 25.34
206、trillion,which was lower than the scale of public funds,RMB 27.69 trillion,for the first time.Of which,the scale of existing wealth management products issued by wealth management companies dropped to 20.67 trillion yuan,a decrease of 1.57 trillion yuan and a decrease of 7.06%from the end of 2022.Af
207、fected by capital market fluctuations,product scale decline,fee reduction and profit-sharing measures,the subsidiaries of wealth management witnessed a YoY decline in net profit in the first half of the year.According to statistics from 19 wealth management subsidiaries that have announced their net
208、 profits,wealth management subsidiaries achieved a total net profit of RMB 12.318 billion in the first half of the year,a decrease of 4.228 billion yuan or 25.55%from the same period last year.The financial product market is still dominated by individual investors,and the overall risk preference ten
209、ds to be stable.In response to the fluctuations in the capital market and the needs of investors,the scale and proportion of closed-end financial products are growing.By the end of June,the existing closed-end wealth management products was RMB 5.08 trillion,an increase of RMB 0.3 trillion from the
210、end of 2022.The closed-end wealth management products accounted for 20.05%of all existing wealth management products,an increase of 2.77%from the end of 2022.As the maturity of closed-end products is extended,the weighted average maturity of new closed-end products has extended from 186 days in 2019
211、 to 346 days in June 2023 according to the Semi-annual Report on Chinas Banking Wealth Management Market(2023 1H).RMB trillion3.Scale of wealth management products decreased,while the scale of closed-end products increased40China Banking Review 2023 1HProductsOperation Mode2023 1H2022 2H2022 1HScale
212、 RMB trillionProportionScaleRMB trillionProportionScaleRMB trillionProportionClosed-end products5.0820.05%4.7817.28%4.8616.67%Open-end products20.2679.95%22.8782.72%24.2983.33%Total25.34100.00%27.65100.00%29.15100.00%Table 7:Scale and proportion of wealth management productsSource:Semi-annual Report
213、 on Chinas Banking Wealth Management Market(2023 1H),Annual Report on Chinas Banking Wealth Management Market(2022)and Semi-annual Report on Chinas Banking Wealth Management Market(2022 1H)3.61%2.09%3.39%2.82%2.84%2.64%2022 1H2022 2H2023 1H理财平均收益率10年期国债收益率Figure 28:Changes in yield rates of wealth m
214、anagement productsAccording to the Semi-annual Report on Chinas Banking Wealth Management Market(2023 1H),in the first half of 2023,the average yield of wealth management products rebounded to 3.39%,an increase of 1.3 percentage points from the end of 2022 and 0.75 percentage points higher than the1
215、0-year government bond yield.The net loss rate of financial management products has returned to the level before the redemption wave of financial management products.Wealth management companies actively expand agency sales channels other than the parent bank.In the first half of the year,the proport
216、ion of wealth management products sold by wealth management companies on behalf of the parent bank further declined.The number of cooperative sales agencies of financial management companies increased to 417,an increase of 89 from the beginning of the year.For cash management products,various instit
217、utions have launched innovative sales models such as combination sales,increased product quick redemption limits,and created product selling points.As deposit interest rates will continue to decline,wealth management products are expected to rebound.4.Yield rate of wealth management products rebound
218、edAverage yield of wealth management productsAverage yield of 10-year treasury bondChina Banking Review 2023 1H41VCapital Management42China Banking Review 2023 1H17.08%17.13%17.54%16.84%13.89%13.22%13.50%13.30%14.27%13.74%14.00%13.80%20212022 1H20222023 1H大型商业银行城农商行股份制商业银行12.14%11.92%12.25%11.60%10.
219、06%9.62%9.67%9.56%9.64%9.45%9.72%9.63%20212022 1H20222023 1H大型商业银行城农商行股份制商业银行Capital adequacy ratio,as the core banking regulatory indicator,is the basic foundation for the continued operation of banks.In the first half of the year,commercial banks actively responded to the national financial policy
220、 to support the real economy and continued to expand loans to smooth the virtuous economic and financial cycle.The profit growth rate of the banking industry slowed down.As at the end of June 2023,core tier 1 capital adequacy ration(“CAR”)and CAR of listed banks both declined.Large commercial banks
221、had maintained a higher CAR than the other two types of banks.In the first half of the year,large commercial banks fulfilled their obligations to keep a high growth in assets,showing a significant decline in the core tier 1 CAR and CAR.Both joint-stock commercial banks and city and rural commercial
222、banks were burdened by capital sources,and witnessed a minor decline in the core tier 1 CAR and CAR.The core tier 1 CAR of certain joint-stock commercial banks and city and rural commercial banks were approaching the regulatory limits.With the implementation of the Measures for the Capital Managemen
223、t of Commercial Banks(Draft for Comments)and build a differentiated capital supervision system,listed banks continued to reinforce their operating foundations,strengthen asset portfolio management,replenish capital through multiple channels and diversification,and improve capital use efficiency and
224、risk resilience.Figure 29:Core tier 1 CARFigure 30:CAR1.Capital adequacy ratio generally declinedLarge commercial banksCity and rural commercial banksJoint-stock commercial banksLarge commercial banksCity and rural commercial banksJoint-stock commercial banksChina Banking Review 2023 1H43In order to
225、 alleviate capital pressure,banks replenish capital through various channels.In the first half of 2023,listed banks raised a total of approximately RMB 298 billion in capital through the issuance of secondary capital bonds,perpetual bonds and convertible bonds,representing a 42%decrease from RMB 510
226、 billion in the same period last year.Affected by factors such as the decline in market subscription demand,the popularity of listed banks in issuing perpetual bonds declined in the first half of the year,with a significant decrease compared with the previous year.After the large issuance of tier 2
227、capital bonds in 2022,listed banks issuance in the first half of the year shrank to RMB 264 billion,an decrease of approximately 24%from the same period last year.In addition,listed banks have actively expanded channels for external capital replenishment.In the first half of 2023,Postal Savings Bank
228、 of China and China Zheshang Bank replenished core tier 1 capital by a total of RMB 54.7 billion through share allotment and capital contribution.3,100 2,250 1,300 300 250 150 50 210 140 240 50 40 020221H20231H20221H20231H20221H20231H大型商业银行股份制商业银行城农商行Tier 2 capital bondsPerpetual bondsConvertible bo
229、ndsRMB 510 billionRMB 298 billion20221H20231H-2,000 4,000 6,000Figure 32:Amount of capital replenishment instruments issued by listed banksFigure 31:Amount of capital replenishment instruments issued by listed banksRMB 100 million2.Scale of capital raising decreased,and internal capital supplement b
230、ecame the main sourceLarge commercial banksJoint-stock commercial banksCity and rural commercial banksChina Banking Review 2023 1H44On 18 February 2023,the former CBIRC officially released the Measures for the Capital Management of Commercial Banks(Draft for Comments)(thereafter the“Measures”),that
231、imposed“tiered regulation”and once again clarified the requirements of capital adequacy ratio and leverage ratio for commercial banks.After the implementation of the Measures,the 58 listed banks will adopt relatively complex capital measurement methods according to their respective tiers,such as adj
232、usting the credit risk weights of corporate,interbank,and retail businesses,and adjust the capital measurement rules for market risks and operational risks.Banks will also face more comprehensive,in-depth and detailed disclosure requirements related to capital and risk management.7.5%*Red line in th
233、e above figure represents he minimum capital adequacy ratio and leverage ratio of commercial banks required by the new capital regulationsNote:As Luzhou Bank did not disclose leverage ratio,it was not included in the above calculation of leverage ratio.Figure 33:Capital adequacy ratio and leverage r
234、atio of listed banks in 2023 1H6.97%6.54%6.91%4%11.60%9.63%9.56%核心一级资本充足率13.22%11.33%11.01%一级资本充足率8.5%16.84%13.80%13.30%10.5%Large commercial banksJoint-stock commercial banksCity and ruralcommercial banksLarge commercial banksJoint-stock commercial banksCity and rural commercial banksLarge commerci
235、al banksJoint-stock commercial banksCity and rural commercial banksLarge commercial banksJoint-stock commercial banksCity and rural commercial banks3.New capital regulations demand supervision on different capital tranches,and capital management requirements are comprehensively upgradedCore tier 1 c
236、apital adequacy ratioTier 1 capital adequacy ratioCapital adequacy ratioLeverage ratio45China Banking Review 2023 1HStatistical interpretations of financial data of listed banksPwC Financial Services contact informationAppendixChina Banking Review 2023 1H461.Financial investments include:Financial a
237、ssets at fair value through profit or loss,financial assets at fair value through other comprehensive income,and financial assets at amortised cost.2.Interbank assets include:Amounts deposited with banks and other financial institutions,funds disbursed,and financial assets purchased under resale agr
238、eements.3.Interbank liabilities include:Funded deposited by banks and other financial institutions,funds borrowed,and financial assets sold for repurchase.4.Issued debt securities include:Subordinate debt,tier 2 capital debt,convertible corporate debt,green bonds,financial bonds,and debt instruments
239、 such as hybrid capital bonds,certificates of deposit,and certificates of interbank deposit.5.Average ROA=net profit/average opening and closing balance of total assets.The weighted average return on net assets is calculated in accordance with the provisions of the China Securities Regulatory Commis
240、sions“Information Disclosure and Reporting Rule No.9 for Companies Offering Securities to the Public:Calculation and Disclosure of Return on Net Assets and Earnings Per Share(revised in 2010).6.Net profit margin=average return on interest-earning assets-average interest rate of interest-bearing liab
241、ilities;Net interest spread=net interest income/average interest-earning assets7.Cost-to-income ratio=business and management expenses/operating income8.NPL ratio=NPL balance/customer loan balance;Special mention loan ratio=special mention loan balance/customer loan balance;Overdue loan ratio=overdu
242、e loan balance/customer loan balance9.Provision coverage ratio=loan impairment provision balance/NPL balance;Loan-to-provision ratio=loan impairment provision balance/total customer loans and advances10.Core tier 1 capital adequacy ratio=Net core tier 1 capital/total risk-weighted assets;Tier 1 capi
243、tal adequacy ratio=net tier 1 capital/total risk-weighted assets;Capital adequacy ratio=Net capital/total risk-weighted assets11.There may be minor differences between the sum of the sub-items and the total due to rounding.Statistical interpretations of financial data of listed banksThe main statist
244、ical metrics of financial data involved in this report are explained as follows:47China Banking Review 2023 1HJames Chang Financial Service Leader,PwC China+86(755)8261 Margarita Ho-Beijing+86(10)6533 Richard Zhu-Beijing+86(10)6533 Linda Yip-Beijing+86(10)6533 Michael Hu-Shanghai+86(21)2323 James Ta
245、m-Hong Kong+852 2289 Shirley Yeung-Shenzhen+86(755)8261 Anthony Chen-Shenzhen+86(755)8261 Olivia Xie-Guangzhou+86(20)3819 Audit ServicesPatrick Zhou-Shanghai+86(21)2323 Edith Wong-Hong Kong+852 2289 PwC Contacts47China Banking Review 2023 1HChina Banking Review 2023 1H48Consulting servicesJianping W
246、ang-Shanghai+86(21)2323 Jeff Hao-Beijing+86(10)6533 Ying X Zhou-Beijing+86(10)6533 Toby Zhang-Shanghai+86(21)2323 Qing Ni-Beijing+86(10)6533 Brian KY Yiu-Hong Kong+852 2289 Oliver Kang-Beijing+86(10)6533 Tax ServicesMatthew Wong-Shanghai+86(21)2323 48China Banking Review 2023 1HThis document is prov
247、ided only for the purpose of providing general information and should not be used as a substitute for advice provided by professional consultants.2023 PwC.All rights reserved.PwC refers to the PwC network and/or one or more of its member firms,each of which is a separate legal entity.Please see for further details.