Postal Savings Bank of China faces ROAA decline but sustains strong fee income 

Adequate provisions to buoy resilient asset quality.

Postal Savings Bank of China’s net fee and commission income is expected to remain higher than its peers over the next 12-24 months, reports S&P Global Ratings, on the back of the bank’s large client base.

This large client base gives PSBC the potential to develop its wealth management business further, the ratings agency said in a report.

One weakness is that its return on average assets (ROAA) could weaken over the next 12-24 months, as a result of continued compression of net interest margins (NIMs). NIM was down by 19 basis points in 2023, mirroring industry trends.

Asset quality will remain resilient thanks to PSBC’s adequate provisions. The bank had a ratio of provisions to total loans of 2.88% as of end-2023.

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The provisions can cover 191.5% of PSBC's non-performing loans (NPLs) and special-mention loans (SMLs), or 204.5% of its Stage 2 and Stage 3 assets. 

NPL ratio is 0.83% as a portion of customer loans, and the SML ratio is 0.68% as of end-2023. 

Although the share of property loans amongst its corporate loans rose to 3.11% from 2.93% at end-2022 and 2.15% at end-2021, the figure was still lower than the 4.0% average for megabank peers, S&P said.