2014 Listed Banks Result Analysis

Insights

2014 Listed banks result analysis

As the listed banks announced their performance in 2014, together with management's discussion and analysis, GFSI team issued the report focus on certain key challenges faced by the Chinese banking industry.

Banks' performance in 2014 is drawing wide attention from the public. On one hand, investors are keen to understand the impact of interest rate liberalization and asset quality decline on banks' bottom line. On the other hand, investors also hope to find support for the recent surge of the banks' stock price.

Currently, there are more than 20 listed banks (A and / or H) in the market and up to the end of March 2015, there were 11 banks that had announced their results in 2014. We believe that these 11 banks are representatives of the listed banks sector. 

Based on the size and profit level, these banks can be classified into three level:

Asset Size (RMB Trillion)

Profit(RMB 100M)

Bank

15-20

1600-2800

ICBC, ABC, CCB, BOC

4-7

400-700

Bocom, CMB, CITIC, Minsheng, Pufa

<3

<300

Everbright, Ping An

 

Slowing down of profit growth

This is an industry wide issue and it may not be caused directly by narrower margin. On one hand, the impact of interest rate liberalization may not be fully reflected in 2014, on the other hand, there are signs that certain banks were able to improve their interest rate margin by adjusting their asset and liabilities structure.  

Decline in asset quality

All 11 banks have shown decline in both NPL and NPL ratio. Increase in provision is the main cause for the slow-down of profit growth. According to the overdue-impairment ratio, there is risk that asset quality will further decline in the short term.

Continuous innovation

In responses to the pressure on profit growth, continuous innovation seems to be the only way to maintain the return to shareholders.

In their annual report, the big four banks, CMB, Minsheng and Ping An discussed about their strategies on internet finance and electronic banking in depth. Apart from these banks, we understand that the whole banking sector is also looking for ways to innovate.

Apart from those few large state owned banks that would develop their own platform, more and more banks are cooperating with third parties to develop their internet finance business.  Target markets have grown from the traditional retail and corporate customers to inter-bank sector.  A variety of delivery channels is in play.

We believe the banking industry is facing many significant challenges but the space for innovation and growth is also huge. 

(Simplified Chinese version only)
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