On March 21, Financial Association reported (Reporter Guo Zishu) that as the first state-owned large bank to disclose its annual report, Bank Of Communications (601328.SH) reveals its 2024 operational blueprint. In 2024, Bank Of Communications achieved a net operating income of 260.269 billion yuan, a year-on-year increase of 0.87%; net income was 93.586 billion yuan, a year-on-year increase of 0.93%. During the same period, the bank's non-performing loan rate was 1.31%, down 0.02 percentage points from the end of last year; the provision coverage ratio was 201.94%, up 6.73 percentage points from the end of last year.

Among them, Bank Of Communications' net interest margin slightly decreased by 1 basis point to 1.27%, based on 1.28% in 2023; it achieved net income from fees and commissions of 36.914 billion yuan, a decrease of 6.09 billion yuan year-on-year, a decline of 14.16%.

In response to market concerns regarding interest margin trends, non-interest income outlook, and Retail Trade credit deployment, several executives from Bank Of Communications provided detailed explanations during the 2024 performance press conference, addressing market concerns.

Question 1: Has the interest margin level reached a turning point? What should be done this year?

Zhou Wanfu, Vice President of Bank Of Communications, pointed out: "The regularization trend in the banking industry is obvious, and Bank Of Communications' situation is basically consistent with the market, continuing the trend of regularization. In the short term, interest margins still face certain downward pressure."

In 2024, Bank Of Communications' balance of demand deposits decreased by 24 billion yuan compared to the end of the previous year, while time deposits increased by 253.7 billion yuan compared to the end of the previous year, with the balance ratio of time deposits reaching 64.98%, an increase of 1.08 percentage points compared to the end of the previous year.

According to Zhou Wanfu, on one hand, the asset side is continuously affected by the LPR adjustment, the adjustment of existing mortgage rates, and other policy factors, coupled with weak effective demand and intensified industry competition, leading to downward pressure on asset yields. On the other hand, the liability side is jointly influenced by changes in the external environment and customer preferences, maintaining the trend of regularization and long-termization of the deposit structure, which to some extent delays the overall decline in the Average Cost of deposits.

It is expected that this year's situation will be better than the previous two years. Factors are seen that are bullish for stabilizing or enhancing the net interest margin.” Zhou Wanfeng believes that whether it is the implementation of more proactive fiscal policies, the implementation of policies to promote the growth of credit demand, or moderately loose monetary policies, structural monetary policy tools, and the role of interest rate self-discipline mechanisms, favorable conditions are provided for the growth of credit demand and the reduction of liability costs, further stabilizing asset returns.

To stabilize revenue and profits for the entire year, strengthening net interest margin management is also one of the four key tasks of Bank Of Communications. Zhou Wanfeng pointed out that on the asset side, there is a commitment to both grow the overall volume and optimize the structure. The Bank Of Communications aims to enhance the proportion of loans in related fields of the 'Five Major Articles' and retail loans among all loans while ensuring an increase compared to the previous year. On the liability side, it is necessary to improve the overall coordination of volume and price balance, increase efforts in structural optimization, vigorously expand low-cost liabilities, and strengthen the refined management of deposit costs to continuously reduce liability costs.

Question two: Why did non-interest income decrease? How will efforts be made in 2025?

The annual report shows that in 2024, Bank Of Communications achieved a net income from fees and commissions of 36.914 billion yuan, a decrease of 6.09 billion yuan year-on-year, a decline of 14.16%. Among them, due to insufficient consumer willingness and proactive optimization of customer structure, income from credit card business decreased by 3.936 billion yuan year-on-year, a decline of 20.98%; affected by regulatory policy factors of reduced fees, income from agency-type businesses decreased by 1.772 billion yuan year-on-year, a decline of 33.60%.

At the same time, the Bank Of Communications achieved other non-interest income of 53.523 billion yuan, an increase of 2.636 billion yuan year-on-year, of which net income from trading activities was 21.919 billion yuan, a decrease of 1.305 billion yuan year-on-year, a decline of 5.62%. This is mainly affected by market fluctuations, with increased year-on-year gains and losses from equity valuations, bonds, and interest rate derivatives; on the other hand, the scale of swap business has increased, leading to an increase in foreign exchange losses year-on-year.

Zhou Wanfeng believes that overall, the marginal improvement of the growth rate of fee income in the banking industry this year is expected to be better than last year. With the national package of incremental policies, especially those stabilizing the stock market and real estate market, and boosting consumption, bank-related fee businesses will see greater development. Year-on-year, the integration of reported banks and policy changes regarding fund management fees will also have a smaller impact on growth in non-interest income.

Focusing on intermediary business and strengthening profit support is also one of the key tasks for Bank Of Communications in 2025. The growth potential mainly lies in wealth management business, income from credit cards, and international business. For instance, integrated comprehensive financial services in both domestic and foreign currencies, and international settlement business.

Zhou Wanfeng introduced that the Bank Of Communications will further strengthen the design, combination, and delivery capabilities of wealth management products across all categories, ensuring product configurations are tailored to differentiated customer needs with 'one strategy for one household,' continuously strengthening the wealth management business. Additionally, leveraging the group's integrated operation and full-license advantages, business cooperation and synergy between the offshore and onshore parent banks and subsidiaries will be enhanced, expanding diverse sources of fee growth while meeting comprehensive financial service needs for customers.

Question three: How has the retail Business been since the beginning of the year? Why was the credit card center closed?

In 2024, the personal loan balance of Bank Of Communications is 2.75 trillion yuan, a year-on-year increase of 11.29%. Among these, the balance of personal housing loans is 1,466.604 billion yuan, an increase of 3.97 billion yuan from the end of last year, with a growth rate of 0.27%; credit card loans increased by 48.679 billion yuan from the end of last year, a growth rate of 9.94%; personal operational loans increased by 70.041 billion yuan from the end of last year, a growth rate of 20.39%; and personal consumer loans increased by 156.837 billion yuan from the end of last year, a growth rate of 90.44%.

According to Zhou Wanfeng, this year's retail loan growth at Bank Of Communications is expected to surpass last year's, and the proportion of retail loans will further increase.

From the perspective of personal housing loans and consumer loan Business, the growth from the beginning of the year to now has increased compared to the same period last year.

Zhou Wanfeng introduced that from the beginning of the year to now, with the implementation of policies to promote the stable development of the Real Estate market, the Real Estate market is recovering favorably, and residents' consumer confidence is gradually recovering, leading to an increase in personal housing loans year-on-year at Bank Of Communications. At the same time, consumer loan Business is maintaining a high-speed growth.

In addition, regarding operational loans, due to the recovery of funds for personal operational loan owners before the Spring Festival and factors such as the Spring Festival holiday, the financing demand for personal operational loans has declined, and loan growth has slowed down; the credit card Business has also seen a decline in the entire market, and our Bank also experienced a decline. With the gradual effectiveness of some policies to boost consumption, the situation is expected to improve progressively.

In response to Bank Of Communications closing three credit card sub-centers, Zhou Wanfeng stated: "This is part of the reform at Bank Of Communications. In the past, the credit card Business of Bank Of Communications was operated directly by a centralized credit card center, which had unique advantages during the rapid development phase of credit card Business. As the credit card Business has developed to a new stage, the limitations of this model have become increasingly evident."

Based on customer needs and development stages, Bank Of Communications is reforming the credit card Business model, shifting from a centralized, direct operation to branch-based operations, providing one-stop, comprehensive financial services to local customers and integrating credit card Business into mobile retail Business for unified management.