Finance and Economics Society November 12th news (Reporter Cao Yunyi) Bank of Communications held a third-quarter earnings conference today to address investor concerns. In the first three quarters, the Bank of Communications saw a double decline in net income and revenue. In response to this, Bank of Communications stated at the earnings conference that the main reason was the relatively weak growth of fees, investment valuation, and exchange gains and losses, but the one-time impact of policy factors on fee income is expected to gradually fade next year.

In the first three quarters, Bank of Communications' net interest margin was 1.28%, a year-on-year decrease of 2 basis points. Faced with interest rate pressure in the fourth quarter, Bank of Communications stated that it will continue to increase the proportion of loans to customers with relatively high interest rates. At the same time, it will continue to optimize the loan business structure, increase the proportion of substantial loans with relatively high interest rates, and reduce low-yield loans such as bills and non-bank loans.

In addition, the China Banking and Insurance Regulatory Commission has clearly stated that it will increase the core tier-one capital of six state-owned commercial banks. Bank of Communications stated that in the context of the overall slowing growth of net income in the banking sector and narrowing net interest margins, despite facing some pressure on the level of sufficient capital, Bank of Communications will actively promote the replenishment of core tier-one capital.

Insurance fund agency business decreased year-on-year, and fee income may improve next year.

It is worth noting that among the large state-owned banks, Bank of Communications is the only bank that saw a decline in both revenue and net income. Bank of Communications achieved revenue of 196.411 billion yuan in the first three quarters, a decrease of 1.37% year-on-year; achieving a net profit attributable to the parent of 68.69 billion yuan, a decrease of 0.69% year-on-year.

Specifically, the bank's fee and commission net income saw a significant decline, achieving 29.353 billion yuan in the first three quarters, a decrease of 4.762 billion yuan year-on-year, a decrease of 13.96%. This was also a major reason for the overall decline in revenue, accounting for 14.97% in revenue, a decrease of 2.18 percentage points year-on-year.

Previously, in the semi-annual report, Bank of Communications' bank card business income decreased by 19.77% year-on-year. At that time, Bank of Communications stated that it was mainly due to a year-on-year decrease in consumer spending combined with factors such as actively clearing high-risk customers, resulting in a decline in credit card rebate income and default penalty income. This contraction trend continued into the third quarter.

Today, Vice President Zhou Wanfu of Bank of Communications further analyzed the reasons at the earnings conference. It is mainly affected by policy factors such as the consolidation of bank and insurance fees and the reduction of commission rates for equity fund products, resulting in a year-on-year decline in income from insurance agency and fund sales businesses.

"In addition, investment valuation and foreign exchange gains and losses decreased by 13.15% year-on-year. This is mainly due to one-off factors such as individual equity investment projects going public during the same period last year, raising the valuation base, which are not normalized operational impacts; at the same time, affected by foreign exchange exposure and exchange rate changes, foreign exchange income decreased year-on-year," Zhou Wanfu pointed out.

However, Bank of Communications pointed out at the earnings conference that performance will improve next year. Zhou Wanfu believes that the one-time impact of policy factors on fee income will gradually fade. The bank will increase efforts in non-interest businesses to strengthen profit support. Firstly, enhancing product capabilities. Secondly, expanding diverse sources of fee income growth, increasing points of growth in intermediary business revenue, and aiming for relatively stable fee and commission net income. Thirdly, further enhancing trading capabilities of various financial products, while strengthening the dynamic monitoring of investment exposure and investment symbols, reducing the impact of capital market fluctuations.

Securities investment yield decreased year-on-year, with continued pressure on capital adequacy levels.

In terms of interest margin management, Bank of Communications' net interest margin for the first three quarters was 1.28%, a year-on-year decrease of 2 basis points. "Firstly, affected by factors such as the LPR reduction, adjustment of existing mortgage interest rates, and '517' real estate policies, the customer loan yield decreased by 34 basis points year-on-year; secondly, influenced by the overall downward trend of market rates, the securities investment yield decreased by 6 basis points," Zhou Wanfu stated.

Facing pressure on interest margins in the fourth quarter, Zhou Wanfu pointed out the need to continuously increase the proportion of customer loans with relatively high yields, reduce the proportion of cash and funds deposited with the central bank. At the same time, continuously optimize the loan portfolio structure, increase the proportion of substantive loans with relatively high yields, and reduce low-yield loans such as bills and non-bank loans.

"In terms of liability cost control, strengthening the fine management of deposit pricing, the effects of multiple previous deposit rate cuts continue to be evident. At the same time, vigorously reduce the costs of high-cost deposits and actively expand low-cost liabilities," Zhou Wanfu stated.

Previously, Bank of Communications expected certain pressure on asset quality in the second half of the year and will further increase efforts to control asset quality, implementing various measures to prevent and resolve risks. Firstly, implementing the national debt-to-equity policy, cooperating with local governments to resolve debt risks in accordance with the principles of "lawfulness, compliance, and commercial sustainability." Secondly, implementing national real estate regulatory policies.

Li Yunze, Director of the China Banking and Insurance Regulatory Commission, stated at a State Council Information Office press conference that the country plans to increase the core Tier 1 capital of six large commercial banks, with attention on the core Tier 1 capital adequacy ratio of major banks. As of the end of the third quarter, the core Tier 1 capital adequacy ratio of Bank of Communications was 10.29%.

In the current situation where the overall net profit growth rate of the banking industry is slowing down and the net interest margin is shrinking, Bank of Communications' capital adequacy level still faces certain pressures. Bank of Communications Vice President Zhou Wanfu stated that with the China Banking and Insurance Regulatory Commission clearly planning to increase the core Tier 1 capital of six state-owned commercial banks, Bank of Communications will promote the supplementation of core Tier 1 capital and continue the normalization of issuing other capital instruments.