On October 30, a financial frontline report stated that Industrial And Commercial Bank Of China Limited (ASX: 601398) held its third-quarter 2026 results briefing today.
Regarding questions related to the net interest margin, a relevant person in charge of ICBC's asset and liability department said that in the first three quarters of this year, the increment in total social financing was RMB 27.5 trillion, of which new bond and equity financing accounted for 49.5%, exceeding the share of new loans by about 7 percentage points. The shift in the social financing structure from indirect to direct financing is also reflected in ICBC's balance sheet. In the first three quarters, the average daily scale of ICBC's bond investment increased by 18.8% from the beginning of the year, while the average daily scale of all loans rose only 6.2% year on year. This change in the incremental structure is becoming a new variable affecting the performance of the net interest margin.
He further pointed out that, however, thanks to the improvement in liability costs, ICBC's net interest margin still showed a stabilizing trend. In the first three quarters, the net interest margin was 1.29%, up 1 basis point from the previous year and basically flat compared with the interim level. "Looking ahead to the next two years, our basic judgment is that if policy rates remain stable, our bank's net interest margin is expected to stabilize and bottom out within the year, and there may be slight narrowing pressure next year." He believes there are mainly three factors affecting the trend of the net interest margin.
First, the improvement in liability costs supports the stabilization of the net interest margin, but the phased dividend is gradually fading. Since the beginning of the year, ICBC has fully implemented the requirements of the interest rate self-discipline initiative and carried out refined management of deposit renewals upon maturity. The interest payment rate on liabilities fell by 20 basis points from the beginning of the year, strongly supporting the smooth operation of this year's net interest margin. However, it should also be noted that as the volume of high-interest time deposits maturing gradually decreases, the phased dividend from cost improvement has begun to weaken, and the positive contribution to next year's net interest margin is expected to show diminishing marginal returns.
Second, the downward pressure on asset yields has eased somewhat, but it will still drag on the performance of the net interest margin. In the first three quarters, ICBC's loan repricing was basically completed, and newly issued loan rates tended to stabilize, driving asset yields to decline 19 basis points less year on year, easing the downward pressure on this year's net interest margin. But in the longer term, changes in the social financing structure are long-term and trend-based, and the share of bond investment, which has a longer repricing cycle, will continue to rise, so next year's asset yields will also continue to come under pressure.
Third, foreign exchange and overseas economic opportunities and challenges coexist. At present, major developed economies have entered a monetary tightening cycle, creating spillover shocks to global markets through multiple channels such as interest rates, exchange rates, and cross-border capital, and the stability of foreign exchange and overseas operations is facing tests. Based on the current situation, the interest rate sensitivity of ICBC's overseas liability side is higher than that of the asset side, and this structural feature will increase the pressure on managing overseas net interest margins.
"In the next stage, in the face of changes in the financing structure amid the transition between old and new growth drivers, we must strive to reduce the volatility of interest net income growth and give full play to its role as the basic underpinning for stabilizing the economy and stabilizing profits." He proposed the following three measures.
First, continue to strengthen liability cost management. Accelerate the creation and optimization of a diversified liability layout, strictly implement the deposit self-discipline initiative, do a good job in taking on high-interest deposits, strive to expand low-cost funding sources through businesses such as custody and settlement, and promote a continued decline in interest payment costs.
Second, effectively do a good job in optimizing asset quality control. Increase resource allocation to key areas, pay close attention to risks in retail areas such as credit cards and personal business loans, safeguard asset quality security with intelligent risk control, and reduce losses in asset returns.
Third, resolutely hold the bottom line on interest rate risk. Strengthen the combined management of asset and liability scale, interest rates, maturities, and structure, keep interest rate gaps and duration gaps within a reasonable range, guard against shocks brought by directional changes in market interest rates, and stabilize the volatility level of net interest income.
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