Recently, Zhang Rongsen, **** Zheshang Bank, resigned just 10 days after being reappointed, sparking widespread market attention.

China Zheshang Bank Chairman Lu Jianqiang responded publicly today at the 2024 semi-annual performance briefing: "Individual executive changes will not have an impact on the operation of China Zheshang Bank, and all operational activities of China Zheshang Bank are proceeding as usual." Currently, China Zheshang Bank Chairman Lu Jianqiang is acting in the role of President.

In addition to responding to the bank's operating conditions, the senior management team of China Zheshang Bank also responded to the issue of narrowing interest rate spreads that the banking industry generally faces. China Zheshang Bank Assistant President Hou Bo (to be appointed) stated that the interest rate spread has shown signs of stabilization and recovery on the margin. At least 10 listed banks have indicated in their interim reports or performance briefings that there are signs of stabilizing and improving net interest margins.

The interest rate spread is showing signs of stabilization and recovery, and future efforts will be made from both the asset and liability sides.

In the first half of 2024, China Zheshang Bank's revenue reached 35.279 billion yuan, a year-on-year increase of 6.18%; the net income attributable to shareholders of the bank reached 7.999 billion yuan, a year-on-year increase of 3.31%. The bank's total assets increased by 3.27% to 3.25 trillion yuan compared to the end of last year, with total loans and advances increasing by 5.59% to 1.81 trillion yuan compared to the end of last year. Total liabilities reached 3.05 trillion yuan, an increase of 3.31% compared to the end of last year, with total deposits increasing by 3.74% to 1.94 trillion yuan compared to the end of last year.

As for the interest rate spread, in the first half of the year, China Zheshang Bank's net interest margin was 1.82%, a decrease of 32 basis points compared to the same period last year. However, the senior management of China Zheshang Bank emphasized that although the net interest margin of China Zheshang Bank has declined, the decline is relatively small compared to peers.

"In recent years, the banking industry has experienced a rapid narrowing of interest rate spreads, and the entire banking industry has presented a situation of low interest rates, low growth, low profits, and low interest rate spreads due to economic fluctuations and insufficient credit demand." Hou Bo stated that the bank's interest rate spread is currently maintained at a level of 1.82%, a decrease of 32 basis points compared to the same period last year. The net interest margin of joint-stock banks in the second quarter of 2024 is 1.63%.

China Zheshang Bank explained that due to the support of the real economy and the continuous reduction of corporate financing costs, the bank's yield on interest-earning assets decreased by 36 basis points year-on-year. At the same time, in order to actively respond to operational challenges, cultivate the core capability of obtaining low-cost liabilities, optimize the liability structure, and promote the year-on-year decrease of the interest-bearing debt service rate by 2 basis points.

"From a marginal perspective, the interest spread has shown a trend of stabilization and rebound." Hou Bo pointed out that China Zheshang Bank will make efforts from both the asset side and the liability side to stabilize the interest spread. On the asset side, first, we will focus on improving the pricing level of assets. On the one hand, we will classify and manage existing assets on a regular basis, and for businesses with relatively low returns, we will issue tasks for cleaning up, improving and rectifying them in each branch and each line. On the other hand, the focus of credit resource deployment will be on retail micro-loan supply chains with relatively high yields; secondly, we will adhere to the principle of early investment and early returns, and grasp the rhythm of effective investment; thirdly, we will seize market opportunities and expand the flow of assets."

"On the liability side, China Zheshang Bank will lower the deposit interest rate." In the first half of the year, China Zheshang Bank took advantage of the policy window period prohibiting manual interest supplements to further strengthen the management of medium- and long-term liabilities, actively clean up high-interest deposits, expand scenarios for handling salary payment, and administrative institutions, etc., and strengthen internal assessment." Hou Bo said.

Asset quality control has achieved results, and the bank will continue to lower the risk of cyclical sensitive assets.

Pan Huafeng, Assistant President and Chief Risk Officer of China Zheshang Bank, said that from the macroeconomic environment in 2024, the real estate industry is one of the main sources of risk pressure on asset quality. The real estate industry is still in a period of transformation and adjustment. Although a series of positive policies introduced by the government this year have achieved good results, the sales and liquidation of some real estate projects have been relatively slow. At the same time, the rental or operational status of some operational properties has not met expectations.

On the other hand, the repayment ability of some small and micro enterprises and retail customers is still being tested. Due to the current economic environment and the decline in housing prices, the credit risks of some small and micro enterprises and retail customers are still on the rise, which is also one of the sources of risk pressure on asset quality.

Against this background, China Zheshang Bank's loan asset quality remained stable in the first half of the year, and the quality of retail loans improved to some extent. As of the end of June 2024, the non-performing loan ratio of China Zheshang Bank was 1.43%, a decrease of 0.01 percentage points compared to the end of the previous year. Among them, the non-performing loan ratio of corporate loans was 1.38%, an increase of 0.01 percentage points compared to the end of the previous year; the non-performing loan ratio of individual loans was 1.85%, a decrease of 0.06 percentage points compared to the end of the previous year.

The non-performing loan ratio of China Zheshang Bank's real estate industry has decreased from 2.48% at the beginning of the year to 1.26%. Pan Huafeng stated that next, China Zheshang Bank will continue to strengthen risk prevention and control in key areas such as real estate, local government financing platforms, and small loans, continue to accelerate the proactive resolution of stock risks, reasonably support white-listed projects of the urban real estate financing coordination mechanism, and do a good job in the overall risk management and optimization of local government financing platforms and small loans.

As of the end of the first half of the year, China Zheshang Bank's provision coverage ratio was 178.12%; capital adequacy ratio was 12.86%, up 0.67 percentage points from the end of the previous year; core tier one capital adequacy ratio was 8.38%, up 0.16 percentage points from the end of the previous year. Next, China Zheshang Bank will take three measures, including increasing the proportion of intermediary income, expanding non-interest income growth; pushing down cyclical sensitive assets, including high-interest-bearing deposits, and reducing assets in prominent areas of non-performing loans; creating intelligent operations, shifting towards digital and computing-centric digital finance, namely chain-style ecological finance.