Lenders reap dividend from rise in retail banking

Many listed Chinese commercial banks are expanding retail banking, which has made a greater contribution to their operating incomes.

The contribution of retail banking set a record for China Merchants Bank Co Ltd, a national joint-stock commercial lender headquartered in Shenzhen, Guangdong province.

By the end of June, the proportion of retail loans to total loans and advances of the group was 55.04 percent, up 61 basis points from the end of last year. The proportion of operating income of retail banking of the group reached 54.48 percent, up 4.61 percentage points year-on-year, said China Merchants Bank in its 2019 interim results announcement issued on Saturday.

"We believe the advantages of the retail banking business will be highlighted further amid economic growth downturn and faster interest rate liberalization," wrote Li Shanshan, Xing Yanran and Lu Yilin, analysts at BOCI Research Ltd, in a report on Monday.

The monthly active users of CMB's two main apps reached 85.11 million as of June 30, up 5.01 percent from the end of last year. Its investments in information technology reached 3.63 billion yuan ($508 million) in the first half of this year, representing a year-on-year increase of 63.87 percent, or accounting for 2.81 percent of the bank's operating income during the same period, according to the announcement.

"As the annual budget for investments in financial technology is set to be no less than 3.5 percent of the annual operating income of the company in the previous year, we can expect to see more investments in the second half of 2019," said the BOCI Research report.

The asset quality of CMB continued to improve as the bank posted a decline in both the nonperforming loan balance and the NPL ratio during the first six months of this year.

Its NPL balance decreased by 72 basis points from the end of 2018 to 53.22 billion yuan at the end of June. Its NPL ratio also dropped 13 basis points to 1.23 percent over the same period. Meanwhile, CMB enhanced its risk resistance capability, increasing the NPL coverage ratio by 35.94 percentage points to 394.12 percent.

Net profit attributable to shareholders of the bank increased by 13.08 percent year-on-year to 50.61 billion yuan during the reporting period.

Shanghai Pudong Development Bank Co Ltd, another national joint-stock commercial lender, saw the net operating income of its retail banking increase by 12.32 percent year-on-year to 37.06 billion yuan in the first half.

As of June 30, the balance of personal savings of the group increased by 29 percent from the end of last year to 835.81 billion yuan. Over the same period, the balance of personal loans of the group rose 8 percent to 1.6 trillion yuan, accounting for 43.12 percent of the total loan balance.

The growth of the bank's retail savings replaced its liabilities which were at higher costs, and therefore enhanced the stability of its liabilities and lowered its liability costs, said Liu Xinyi, president of SPD Bank, at a media briefing on Friday.

In the first half, the group posted 18.99 percent growth year-on-year of its operating income to 97.6 billion yuan and a 12.38 percent increase in its net profit attributable to shareholders of the parent company to 32.11 billion yuan.

Bank of Jiangsu Co Ltd, a city commercial lender whose total assets reached 2.05 trillion yuan, also recorded an increase of 54.39 billion yuan in its retail loans from the end of last year to 324.92 billion yuan at the end of June. The balance of its retail loans accounted for 34 percent of its total loan balance.

Over the same period, the number of its private banking clients grew by nearly 20 percent. Private banking refers to banking, investment and other financial services provided by banks to high-net-worth individuals with sizable assets.