On September 23, Pricewaterhousecoopers released the "Banking Industry 2022 half Year Review and Outlook of China's banking Industry", showing that the overall net profit of 59 listed banks in the first half of the year increased by 6.28% to 1.09 trillion yuan, and the pre-provision profit increased by 2.06%, which is slightly slower than the same period in 2021. The revenue of large banks is stable, and the growth rate of interest income of joint-stock commercial banks and urban rural commercial banks is slowing down. Although affected by unexpected factors, the domestic banking industry was generally stable, profit growth slowed down, total assets accelerated growth, and asset quality remained stable but polarized.

Zhang Lijun, head of PWC China's financial industry, told Investment Express: "As the challenges facing the real economy increase, the banking industry operating environment is also facing greater complexity and uncertainty, but there are also positive development factors." Banks should take proactive measures to make counter-cyclical adjustments, enhance resilience against risks, and continue to promote reform and strategic transformation to help stabilize economic recovery."

"In the first half of the year, the profitability indicators of listed banks generally showed a slow downward trend," said Xie Ying, China financial sector partner at PWC. The compression of overall interest margins in the banking sector has made listed banks less efficient at generating revenue from asset size than in the past. Large commercial banks and joint-stock commercial banks generally converge in profitability indicators, and urban rural commercial banks are more stable in average return on total assets, relying on lower interest margin decline and investment income growth than joint-stock commercial banks."

In the first half of the year, the net interest margin and net interest margin of listed banks generally showed a narrowing trend. The upward trend of net interest margin and net interest margin of individual joint-stock commercial banks and urban and rural commercial banks mainly benefited from structural adjustment, business scale growth and comprehensive cost reduction of interest-bearing liabilities. From the asset side, the downward pressure on the economy increased in the first half of the year, and the banks responded to the call to benefit the real economy and reduce the financing cost of enterprises. From the perspective of liabilities, the savings deposit structure of the banking industry in the first half of the year was more biased towards time deposits than in the same period.

Data show that by the end of June 2022, the overall assets of listed banks increased by 7.99% compared with the end of 2021, significantly accelerating from the second half of 2021. In terms of asset structure, customer loans of listed banks continued to grow, accounting for a basically stable proportion of total assets, government bond investment increased, and interbank assets rose in the short term. In the first half of the year, listed banks supported moderately advanced infrastructure construction, and the increase of public loans to manufacturing, transportation, leasing and business services topped the list. Consumer credit demand is relatively weak.

At the end of June 2022, the loan quality indicators of 59 listed banks remained stable as a whole, with the non-performing rate falling slightly by 0.01 percentage points to 1.36% compared with the end of 2021, the interest loan rate falling by 0.03 percentage points to 1.84%, and the delinquency rate rising slightly by 0.01 percentage points to 1.42%. At the end of June 2022, the total liabilities of listed banks were 236.6 trillion yuan, an increase of 8.43% over the end of 2021, and the scale of liabilities showed a continuous growth trend. In terms of the structure of liabilities, customer deposits remain the main source of liabilities. The proportion of customer deposits in joint-stock commercial banks and urban and rural commercial banks has continued to rise, while the proportion of interbank liabilities and bonds payable has declined.

At the end of June 2022, the deposit balance of listed banks continued to grow, and the growth rate was significantly higher than that of the first half of 2021. The deposit growth rate of joint-stock commercial banks and urban rural commercial banks is obviously faster than the overall debt growth rate. Under the dual influence of economic downward pressure and capital market fluctuations, residents' willingness to deposit has increased significantly. In terms of deposit structure, the proportion of time deposits in listed banks continued to increase in the first half of the year. In terms of bank financing, the product size of 29.15 trillion yuan. In the first quarter of 2022, affected by the "net breaking" of financial products, the survival scale of financial products declined slightly, but in the second quarter of 2022, the market stabilized and recovered, and the scale of financial products returned to more than 29 trillion yuan.

As of the end of June 2022, the core tier 1 capital adequacy ratio of listed banks has shown an overall downward trend. The profit growth of the banking industry has slowed down, the internal capital replenishment ability is limited, and the core tier 1 capital adequacy ratio of listed banks has declined to varying degrees. The core Tier 1 capital adequacy ratio of individual joint-stock commercial banks and city commercial banks approaches the regulatory requirements. Under the influence of factors such as the increasing difficulty of capital replenishment, these listed banks are facing the pressure brought by the decline in capital adequacy ratio, and capital management needs to be further strengthened.

Xie Ying said: "With the increasing uncertainty of global economic growth, stagflation pressure continues, monetary policy in developed economies has been further tightened, domestic monetary policy easing has put pressure on banks' net interest margins, and bank profitability is also facing a test." It is expected that the banking sector will continue to increase credit issuance, with key areas including infrastructure construction, advanced manufacturing, scientific and technological innovation, small and micro inclusive benefits, while promoting the rapid development of green finance and continuing to promote the digital transformation of the banking sector."

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In the first half of this year, 21 major banks reduced service fees by 137.5 billion yuan

The China Banking and Insurance Regulatory Commission recently pointed out that in the first half of 2022, 21 major banks reduced service fees for other types of market players by 137.5 billion yuan, an increase of 9.5% year-on-year. After the CBRC issued the Guiding Opinions on Standardizing the Management of Regulated Prices in the Banking Service Market, 21 major banks re-sorted and evaluated service items and price standards, cancelled 14 billing service items on average, lowered 16 billing service prices on average, and granted 46 exemptions and concessions to other market entities on average. It can directly calculate the annual increase of 6.2 billion yuan.

The CBRC also said that from the long-term implementation effect, the banking industry will further reduce the actual expenditure of other types of market entities to accept financial services by standardizing service pricing methods, introducing price calibration mechanisms, implementing more refined management, strengthening operational guidance and restricting the behavior of branches and other institutional arrangements.

According to the investigation of the banking and Insurance Regulatory Commission, the long-term institutional effect of fee reduction is first reflected in strengthening the function of service price management. Among the 21 major banks, banks have generally given their branches greater access to deductions; More than 85% of banks have improved the functions of the board of directors and senior management to coordinate the management of service prices, and coordinate the relationship between the implementation of fee reduction policy objectives and the pursuit of their own business objectives; More than 60% of banks review their service items and price standards once a year. At the same time, the surveyed banks introduced three price calibration mechanisms of homogenous comparison, intertemporal cost assessment, and actual implementation of price constraints, and the overall cumulative reduction or reduction of more than 600 service prices, and ensured the long-term implementation effect of fee reduction by standardizing service pricing and calibration mechanisms.