2023 for non-listed banks: Earnings differentiation, some doubling and some "halving"

As the annual report season of listed banks draws to a close, the 2023 annual performance data of non-listed banks is gradually unveiled. On April 22, the Beijing Business Daily reporter found that up to now, a number of non-listed banks have disclosed the operating performance of the past year, affected by factors such as economic development level, industrial structure, market demand, policy orientation and other factors in different regions, the profitability of non-listed banks is significantly differentiated, some banks have increased several times, and some banks' profitability has declined significantly, close to "halving".

The level of revenue is significantly differentiated

On April 22, a reporter from Beijing Business Daily found that a number of non-listed banks have disclosed their operations in 2023 by releasing annual reports and financial statements in the fourth quarter of 2023. On the whole, the profit differentiation of non-listed banks in 2023 will still be significant, with some banks' profit scale growing by more than 500%, and some banks declining year-on-year close to "halving".

In terms of operating income, the non-listed banks were significantly differentiated, among which the operating income of many banks such as Hunan Huarong Rural Commercial Bank, Taizhou Bank, Anhui Langxi Rural Commercial Bank, Guizhou Xingyi Rural Commercial Bank, Zhejiang Zhuji Rural Commercial Bank, Anhui Ma'anshan Rural Commercial Bank, and Zhejiang Wuyi Rural Commercial Bank increased year-on-year.

Specifically, the banks with double-digit increases include Hunan Huarong Rural Commercial Bank and Taizhou Bank, which will achieve operating income of 273 million yuan and 12.552 billion yuan in 2023, up 17.37% and 13.76% year-on-year respectively, while Fujian Haixia Bank, Hengfeng Bank, and Hubei Xiaogan Rural Commercial Bank also achieved a slight increase in operating income, up 1.25%, 0.62%, and 0.39% year-on-year respectively.

However, some people are happy and some are worried, among the non-listed banks that have disclosed their 2023 results, there are also Zhejiang Yueqing Rural Commercial Bank, Guangdong Nanhai Rural Commercial Bank, Jiangmen Rural Commercial Bank, Jiangsu Sheyang Rural Commercial Bank, Lu'an Rural Commercial Bank, Jiangxi Xinjian Rural Commercial Bank, Guangdong Heshan Rural Commercial Bank, Nanchang Rural Commercial Bank, and many other banks' operating income has declined to varying degrees, with a year-on-year decline of between 1% and 23%.

In 2023, the three banks will achieve operating income of 490 million yuan, 557 million yuan, and 1.301 billion yuan respectively, a year-on-year decrease of 9.26%, 10.97%, and 22.18%.

In response to the decline in operating income, a reporter from Beijing Business Daily called a number of banks for interviews, some bank phones were not connected, some banks said that it was inconvenient to respond for the time being, and the relevant people of Jiangxi Xinjian Rural Commercial Bank did not respond positively, the person said, "The information disclosure report will be issued at the end of April."

According to Wang Hongying, president of the China (Hong Kong) Financial Derivatives Investment Research Institute, the divergence in revenue is mainly due to the differentiation of the governance structure and business strategy of various banks, as well as whether the risk control technology can reach a high level. In the context of the increasing popularity of digital technology and financial applications, the identification and management of customer business risks are no longer limited to traditional means, but increasingly rely on accurate judgment at the technical level. However, some non-listed commercial banks have encountered difficulties in coping with this change, and even exposed certain hidden risks, which has also led to a decline in performance.

The net profit of some banks fell by more than 49%

The performance differentiation of non-listed banks is the result of a combination of various internal and external factors, such as regional economic conditions, risk management, business structure, cost control, capital position, regulatory environment, and market competition. Under the interweaving of multiple factors, the net profit data of non-listed banks also showed obvious differences, with some banks increasing by 538%, while others were almost "cut in half".

In 2023, the banks with more outstanding performance include Hunan Huarong Rural Commercial Bank and Shandong Juxian Rural Commercial Bank, and the net profit performance of the above two banks last year was "gratifying", with a year-on-year increase of 538.43% and 134.39% respectively.

Zhejiang Zhuji Rural Commercial Bank, Anhui Langxi Rural Commercial Bank, Zhejiang Fuyang Rural Commercial Bank, Fujian Haixia Bank, and Zhejiang Wuyi Rural Commercial Bank also showed double-digit growth in net profit, with year-on-year growth of 24.69%, 23.63%, 19.81%, 15.67%, and 12.54% respectively.

Compared with listed banks, smaller non-listed banks have limited business scale, geographical coverage is usually concentrated in a certain region or specific market, and the variety of products and services is relatively small, and there are also differences in technology investment, digital transformation, process optimization, etc., which in turn affects performance.

The reporter of Beijing Business Daily combed and found that Jiangsu Sheyang Rural Commercial Bank, Guizhou Xingyi Rural Commercial Bank, Nanchang Rural Commercial Bank, and Hubei Xiaogan Rural Commercial Bank will have a year-on-year decline of more than 40% in net profit in 2023, of which Hubei Xiaogan Rural Commercial Bank will decline by 49.15%.

The net profit of Guangdong Nanhai Rural Commercial Bank, Guangdong Heshan Rural Commercial Bank, Hengfeng Bank and Lu'an Rural Commercial Bank also fell by more than double digits year-on-year, with 12.67%, 15.15%, 23.74% and 31.77% respectively.

In response to the reasons for the decline in net profit, a reporter from Beijing Business Daily contacted a number of banks by calling and sending an interview outline, but most of them did not receive a response. In response, the relevant person in charge of Hengfeng Bank said that "the reason for the decline in net profit is the reversal of the recognized deferred tax assets, and after the restoration of the deferred income tax factor, the net profit increased by 4.8% year-on-year."

In 2024, how can non-listed banks improve their operating level and maintain stable profitability? As Wang Jianhui, a senior researcher of industrial economy, said, in contrast, the operating pressure of non-listed banks is more significant, on the one hand, there is a significant gap with the status, asset scale and brand effect of listed banks, and on the other hand, the financing cost is relatively high and has obvious disadvantages. In the face of fierce market competition, non-listed banks should give full play to their unique advantages in grassroots services and focus on the development of innovative businesses, especially in the field of differentiated businesses. Aiming at a specific customer group or industry, such as "three rural", community residents, upstream and downstream enterprises in a specific industrial chain, etc., we provide professional and customized financial services to create a professional bank image in the market segment.

Wang Hongying further pointed out that for non-listed banks, big data analysis and artificial intelligence algorithms should be used to conduct a comprehensive credit assessment of potential customers, screen out high-quality loan objects, and reduce the probability of non-performing assets from the source. Actively introduce and apply financial technology to realize the refinement and intelligence of the whole process of risk management, and enhance the ability of comprehensive financial services through product innovation and customer relationship management, so as to reverse the decline in performance and ensure steady progress in the highly competitive market environment.

Beijing Business Daily reporter Song Yitong