By the evening of October 30, all A-share listed banks had released their third-quarter reports.
Focusing on the state-owned major banks, most saw their operating conditions improve further in the third quarter compared to the first half of the year. Among them, Agricultural Bank of China and Bank of Communications achieved double-digit growth in net profit attributable to shareholders on a quarterly basis, while Postal Savings Bank of China saw its year-on-year growth rate in net profit attributable to shareholders decline slightly compared to the first half.
Breaking down the results, net interest income generally achieved positive growth across all banks in the first three quarters, while intermediary business income showed divergence.
For net interest income, the most closely watched driver remains the net interest margin, which had already shown clear signs of stabilization in the first half of the year. By the third quarter, three major banks maintained their first-half net interest margin levels: Industrial and Commercial Bank of China (ASX: ICBC) at 1.29%, Agricultural Bank of China (ASX: ABC) at 1.28%, and Bank of China (ASX: BOC) at 1.27%. Two major banks saw slight quarter-on-quarter declines: China Construction Bank (ASX: CCB) at 1.36% and Postal Savings Bank of China (ASX: PSBC) at 1.6%. Bank of Communications (ASX: BoCom) continued to buck the trend, with its net interest margin rising from 1.23% in the first half to 1.24%.
Compared to the same period last year, Agricultural Bank of China and Postal Savings Bank of China saw their net interest margins decline by 2 basis points and 8 basis points respectively in the first three quarters of this year. However, Postal Savings Bank remains the bank with the highest net interest margin among the major banks, while Agricultural Bank has stabilized for multiple consecutive quarters.
Regarding the quarter-on-quarter decline in net interest margin, Ji Zhihong, Vice President and Board Secretary of China Construction Bank, stated at an earnings briefing that this was mainly affected by two factors: first, the impact of the quarterly pace of new bank deposits, as relatively fewer medium- and long-term time deposits matured in the second half of the year; second, the bond market interest rate center continued its downward trend, with the average spot yield on 10-year government bonds in the third quarter at 1.73%, down 5 basis points from the previous quarter, which had a certain impact on quarterly performance.
So how did net interest income, the main revenue driver, perform? Financial reports show that in the first three quarters of this year, Agricultural Bank of China, Bank of China, and China Construction Bank all achieved net interest income growth of over 10%, while Industrial and Commercial Bank of China and Bank of Communications also saw net interest income growth of over 9%. Postal Savings Bank of China recorded growth of 4.58% in this income item.
Non-interest income showed even more pronounced divergence. Fee income saw three increases and three decreases, influenced both by capital market performance and last year's base effects. Among them, Postal Savings Bank of China achieved positive year-on-year growth of 8.72% in net fee and commission income, leading among the major banks. Industrial and Commercial Bank of China and Bank of China also recorded slight increases of 1.55% and 0.07% respectively in this income item. The remaining three major banks saw varying degrees of decline, with Agricultural Bank of China and China Construction Bank seeing their net fee and commission income drop by 10.44% and 5.86% respectively.
In response, Postal Savings Bank of China stated that the growth in fee income was mainly due to the bank actively seizing market opportunities, continuously promoting wealth management expansion and quality improvement, accelerating the light-capital transformation of its corporate segment, and revenue growth from businesses such as fund distribution, wealth management product distribution, financial advisory, and bond underwriting. Agricultural Bank of China emphasized in its financial report that the year-on-year negative growth in net fee and commission income in the first three quarters was mainly due to the high base effect from one-time gains on existing wealth management products in the same period last year. Excluding this factor, on a comparable basis, the bank achieved positive year-on-year growth. China Construction Bank executives also attributed the decline to a higher base in the same period last year, stating that excluding special factors, the bank's net fee and commission income achieved positive growth.
Differences in bond and equity investment allocation affected the growth momentum of other non-interest income across banks. In terms of investment income, only Bank of China saw a year-on-year decline of 31.73% in investment income in the first three quarters, but the bank's fair value change income improved significantly. Other major banks achieved positive year-on-year growth in investment income, but with significant differences in growth rates. Among them, Agricultural Bank of China achieved nearly 81% year-on-year growth in investment income in the first three quarters, providing important compensation for the decline in fee income. Industrial and Commercial Bank of China and Bank of Communications also saw double-digit growth in this income item, while Postal Savings Bank of China and China Construction Bank recorded year-on-year growth of 7.98% and 1.24% respectively.
Combining other sub-items, Postal Savings Bank of China's total other non-interest income achieved positive growth of 15.50%. The bank attributed this mainly to actively promoting transaction transformation, accelerating the trading and circulation of bonds, bills, and other assets, increased gains from bid-ask spreads, and increased valuation of securities investment funds. Bank of Communications achieved a combined investment income and fair value change income of 24.786 billion yuan during the reporting period, an increase of 4.423 billion yuan or 21.72% year-on-year, mainly due to the IPO of its equity project in Changxin Technology, which significantly increased equity fair value change gains.
According to Ji Zhihong, China Construction Bank's other non-interest income grew significantly by 59.83% year-on-year in the first three quarters, up 9.48 percentage points from the first half. This was mainly due to seizing market opportunities, optimizing investment and trading strategies, reasonably allocating asset portfolios, and achieving good returns from certain equity investment projects, with equity and bond-related income growing rapidly.
Regarding asset impairment provisions, banks have experienced a long-term trend of slowing provisions, followed by a recovery and then an increase in recent years. In the first three quarters of this year, the six major banks increased their impairment provisions by approximately 108.1 billion yuan year-on-year, with a total of about 632.3 billion yuan. Among them, Industrial and Commercial Bank of China, China Construction Bank, and Agricultural Bank of China increased their impairment provisions by more than 20 billion yuan year-on-year. In terms of growth rate, Postal Savings Bank of China significantly increased its asset impairment provisions, up 71.88% from last year. The bank stated this was mainly due to loan scale growth and adherence to prudent risk management policies, leading to increased provision levels.
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