Chinese banks’ net profits down 0.81% in Q1

Fees contracted for the first time in 5 years a quarter earlier.

The net profit of 42 A-share banks in China declined by 0.81% in Q1, at the heels of net interest margins contracting for the fourth-straight year in 2023, and with fees contracting for the first time in 5 years.

Operating income contracted by 1.73% in Q1, according to data gathered by EY Greater China for its latest Listed Banks in China report. 

The banks’ assets grew by 3.93%, albeit 1.69 percentage points (ppt) slower than the 5.62% growth recorded in Q1 2023. The non-performing loan (NPL) ratio declined by 0.01ppt to 1.25%.

Overall, listed banks in China remained under great operational pressure in Q1 2024, EY said.

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A subdued 2023
Chinese banks’ have been under pressure since 2023, amidst complexity and looming uncertainty in the year’s macro-environment, EY said.

For 2023, 58 banks in China reported an average decline in net interest margin for the fourth-straight year to 1.69% in 2023. This is 25 basis points lower than in 2022.

Net interest income also fell by 2.98% in 2023 compared to 2022– reportedly the first yearly decline since 2017. 

Fee and commission income fell by 8.05% by end-2023.

Given the decrease in net interest income and net fee and commission income, listed banks reported a total operating income of over RMB5.86t in 2023, a 0.98% decline, EY said.

Operating results reportedly varied across different types of banks: small and medium-sized banks, in particular, need to strengthen their presence and improve resilience to contravene the changes in the  macro environment when compared with large banks, the management consulting firm’s report warned.