2024 Interim Report | Subsidy decline, net profit growth rate falls to 3.3%, CZBANK's expansion pace slows down again

On August 14, Zhejiang Commercial Bank (601916.SH) released its performance for the first half of 2024, with revenue of 35.279 billion yuan, a year-on-year increase of 6.18%; net profit attributable to shareholders was 7.999 billion yuan, an increase of 3.31%.

Previously, Zhejiang Commercial Bank's revenue and net profit have maintained positive growth for four consecutive half-years, but the growth rate has been unstable.

In the first half of 2022, the bank's revenue growth rate reached a peak of 22.53% before falling back.

For the first half of this year, the revenue growth rate was 6.18%, an increase of 1.5 percentage points year-on-year; the net profit growth rate attributable to shareholders reached a peak of 11.03% in the first half of last year, but has now fallen to 3.31%, a decrease of 7.72 percentage points.

Excluding non-recurring gains and losses, Zhejiang Commercial Bank's net profit growth rate has gradually stabilized.

During the reporting period, the bank's non-recurring net profit growth rate was 7.62%, basically flat compared to the same period last year at 7.44%.

The overall decline in net profit may be due to a reduction in government subsidies and rewards, as well as an increase in non-operating expenses.

In the first quarter of this year, the government subsidies and rewards included in the current period's profit and loss decreased from 373 million yuan in the same period last year to 6 million yuan; non-operating income and expenses changed from 7 million yuan to -26 million yuan.

The combination of the two resulted in non-recurring gains and losses decreasing from 383 million yuan to -20 million yuan.

In terms of scale, Zhejiang Commercial Bank is still in an expansion phase, but the growth rate has slowed significantly.

At the end of the reporting period, total assets were 3.2466 trillion yuan, an increase of 3.27% from the end of the previous year, a decrease of 7.8 percentage points from the same period last year; total liabilities were 3.0522 trillion yuan, an increase of 3.31% from the end of the previous year, a decrease of 7.96 percentage points from the same period last year.

The loan-to-deposit ratio may have improved.

At the end of the reporting period, the total amount of loans and advances granted by Zhejiang Commercial Bank was 1.812163 trillion yuan, still less than the deposits absorbed of 1.938479 trillion yuan; however, loans and advances increased by 5.59% from the end of the previous year, exceeding the growth rate of deposits by 1.85 percentage points.

Asset quality is basically stable, with a non-performing loan ratio of 1.43%, a decrease of 0.01 percentage points from the end of the previous year; and a provision coverage ratio of 178.12%, a decrease of 4.48 percentage points from the end of the previous year.

While expanding its lending scale, Zhejiang Commercial Bank emphasizes non-interest income.

The bank's president, Zhang Rongsen, stated at the 2023 annual performance conference that with the slowdown in scale growth and narrowing net interest margin, the company has actively increased non-interest income.

For example, emphasizing wealth management, custody, investment banking, and other customer services.

In the mid-term report, Zhejiang Commercial Bank has not yet disclosed the performance of non-interest income in the first half of the year, but based on the performance in the first quarter, the bank's non-interest business should be in a development stage.

In the first quarter, the net interest income increased by 0.61% year-on-year, while non-interest net income increased by 63.34%; non-interest net income accounted for 35.80%, an increase of 10.24 percentage points year-on-year.

At the same time, the cost-to-income ratio was 27.52%, a decrease of 1.29 percentage points