① Considering the decrease in LPR overlay spread due to the adjustment of existing housing loan interest rates, it will have a certain impact on the 2025 revenue, roughly affecting the interest spread by 2-3 basis points, but the impact on 2024 is limited. ② The new occurrence of non-performing loans mainly comes from three aspects: the risk classification downgrade of individual real estate customers, the slight increase in risk exposure of small and micro loans, and the increasing scale of online credit risk generation.
On November 8th, Caixin reported (Reporter: Shi Sitong) that on the afternoon of November 8th, Bank of Hangzhou held the 2024 third quarter performance earnings conference. Overall, at this event, issues such as interest spread and dividends continued to be of widespread concern to investors, and real estate business-related content was also frequently mentioned.
When discussing the impact of the adjustment of existing housing loan interest rates, the management of Bank of Hangzhou stated that the decrease in LPR combined with the spread will have a certain impact on the 2025 revenue, with a rough effect on the interest spread by 2-3 basis points, but the impact on 2024 is limited. Looking ahead, the bank's net interest margin is expected to further decrease slightly by the end of the year and will still face downward pressure next year.
There is still downward pressure on interest spread in 2025.
From the perspective of performance, in the first three quarters of this year, Bank of Hangzhou achieved revenue of 28.494 billion yuan and net income of 13.87 billion yuan, an increase of 3.87% and 18.63% respectively year-on-year. Among them, net interest income reached 18.273 billion yuan, a 3.87% increase from the same period last year.
In response, Song Jianbin, Secretary of the Party Committee, Chairman, and Acting Secretary of the Board of Directors of Bank of Hangzhou, explained at the earnings conference today that the main drivers of the further increase in net interest income growth rate were the bank's asset growth and liability structure improvement. At the same time, benefiting from the continuous decline in the bond market interest rate center, the bank's fair value changes and investment income in the first three quarters exceeded 7 billion yuan, effectively supporting revenue growth.
At the earnings conference, in response to the industry's common issue of narrowing interest spreads, Zhang Jianfu, Deputy General Manager of Bank of Hangzhou, stated that under the influence of the overall external macro environment and intensified competition in the credit market, banks face greater downward pressure on net interest margins. The interest spread of the bank also faces downward pressure, generally in line with market trends but slightly lower than the industry average decline.
"Compared with the first half of the year, the net interest margin of our bank this quarter has basically stabilized, mainly due to the effectiveness of our cost reduction measures on the liability side. It is expected to further decrease slightly by the year-end." He stated. Caixin reporters noted that Bank of Hangzhou did not disclose the latest interest spread data in this quarter's report, but based on the semi-annual report, Bank of Hangzhou's net interest margin for the first half of the year was 1.42%.
Looking ahead to the future trend, Director Zhang Jianfu bluntly stated that considering the continued decrease in new loan interest rates, the reduction of existing mortgage rates, and the impact of the repricing of existing loans, the overall determination is that the net interest margin may stabilize in the short term within the year, but there may still be downward pressure next year.
Real estate-related business is highly regarded by investors.
Financial media journalists noticed that during this earnings conference, real estate business of Bank of Hangzhou also became a focal point of investors' attention.
Recently, the China Banking Regulatory Commission proposed that commercial banks should 'fully participate in white-list projects, provide loans as much as possible, and do so as early as possible,' to remove the obstacles from 'white-list' to 'financing realization'. In response to this, some investors raised questions regarding whether Bank of Hangzhou will facilitate the lending for real estate projects and whether the company will increase lending for real estate projects.
"As of now, our bank has not been involved in real estate white-list projects under the financing coordination mechanism." Deputy President Zhang Jingke of Bank of Hangzhou stated that the bank will follow the requirements of the regulatory commission, strictly implement the guidance of 'participating fully,' and will continue to operate by selecting good clients, good locations, and good projects based on the bank's risk policy. They will also promptly respond to the specific work arrangements of 'early participation' to support the stable and healthy development of the real estate market.
On the other hand, in response to the impact of adjusting existing mortgage rates, Deputy President Chen Lan of Bank of Hangzhou mentioned that as of the end of the third quarter, the bank's balance of individual housing mortgage loans was 100.449 billion yuan, considering the decline in LPR combined with the decrease in spreads, it will have a certain impact on the revenue in 2025, with an approximate impact of 2-3BP on the interest margin, but the impact on 2024 is limited.
Meanwhile, Deputy President Pan Huafu of Bank of Hangzhou also mentioned at the earnings conference that the main sources of new non-performing loans come from the downgrading of risk classification of individual real estate customers, increased pressure from risks in small and micro loans, and an increase in the scale of risks in internet loans.
He stated that with the implementation of a package of incremental policies aimed at promoting the stable development of the real estate market as promulgated by the government, the real estate market situation is expected to be significantly improved, which will be beneficial for the disposal and resolution of existing real estate risk loans within banks.
The compound annual growth rate of annual dividends per share is basically on par with the compound annual growth rate of net income for the same period.
In addition, during this earnings conference, many investors also mentioned the issue of dividends. "Our bank has always attached great importance to investor returns and reasonable dividend plans are made each year based on profit growth and capital adequacy," said Zhang Jianfu.
According to him, since its listing in 2016, the bank's profitability, asset quality, and return on equity have improved year by year, leading to steady growth in shareholder returns. The compound annual growth rate of annual dividends per share is basically on par with the compound annual growth rate of net income for the same period. "In the future, our bank will continue to develop steadily, serve the real economy, provide investors with better asset returns, and ensure solid support for cash dividends."
In October 2024, the board of directors of Bank of Hangzhou determined the profit distribution plan for the first half of 2024 to be a cash dividend of 0.37 yuan per share based on the recently audited undistributed profits as the criteria, according to a reasonable proportion of the net profit achieved in the first half of 2024.
Song Jianbin stated that the above-mentioned dividends are mainly considered to meet investors' reasonable investment return requirements, while ensuring the continuous replenishment of internal capital to support the sustainable development of the business. Similarly, when formulating the profit distribution plan for 2024, the bank will use the most recent audited undistributed profits as the criteria, based on a reasonable proportion of the net profit achieved in 2024, taking into account the already distributed profits for the first half of 2024, to finally determine the profit distribution plan for the year 2024.
