Best ever report card! Bank of Communications posts double-digit net profit growth, faces multiple challenges in 2022

On 25 March, Bank of Communications ("BOC") released its brilliant 2021 annual results, the first ever double-digit growth in net profit for a major state-owned bank, and the first double-digit growth in net profit in nine years, with net profit approaching RMB 90 billion. This is the first double-digit growth in net profit in nine years, with net profit approaching RMB 90 billion.

With an excellent 2021 report card in hand, CBN also sees new challenges for 2022. "This year is probably the most complex situation I have felt in my almost 30 years in the business." Bank of Communications President David Liu confessed at the results meeting. Faced with the triple pressure of a reignited epidemic, an increasingly complex international situation and a pressured domestic economy, Liu Jun said he would continue to make efforts in five areas in the future - increasing efforts to accurately serve the real economy, focusing on strategic key areas, accelerating digital transformation, leveraging the strengths of the full licence, exploring corporate linkages and group synergies, and conducting comprehensive risk management.

Return to double-digit net profit growth after nine years as combined effect is evident

According to BOCOM, based on its accurate grasp of business opportunities under cross-cycle and counter-cyclical policies, the Group's profitability was significantly enhanced by steady growth in business scale, stable interest rate spreads and a combination of volume and price.

During the reporting period, the Group achieved a net profit (attributable to shareholders of the parent company) of RMB87.581 billion, an increase of 11.89% year-on-year; total assets reached RMB11.67 trillion, an increase of 9.05% compared with the end of the previous year; and the overdue loan ratio was 1.33%, a decrease of 0.21 percentage points compared with the end of the previous year. The balance of loans over 90 days past due accounted for 66% of the balance of non-performing loans; the provision coverage ratio (166.50%) rose significantly by 22.63 percentage points from the end of the previous year.

Since last year, loan pricing has been moving downward quarter by quarter. In the fourth quarter of last year, the average interest rate on new loans issued in the territory was 4.34%, down 2 basis points from the third quarter. It now appears that pricing levels will remain largely stable throughout the first quarter of 2022, with the effect of the LPR reduction to be felt after the second quarter. Against this backdrop, CBI has still effectively strengthened its liability cost management.

Guo Mang, Deputy Governor of CBC, said that CBC's net interest margin (NIM) remained stable in 2021. For the full year, NIM was 1.56%, a slight decrease of 1 basis point from 2020. This was mainly due to the decline in loan yields, while at the same time strengthening the management of liability costs and firmly reducing high-cost liabilities, which had a better "hedge protection" effect on interest rate differentials, with term structured deposits falling by RMB 212.8 billion during the year.

In the future, the Bank plans to increase the expansion of demand deposits, further reduce the cost of liabilities and strive to maintain the basic stability of interest rate spreads.

It is worth mentioning that in 2021, the growth rate of the Bank's fee and commission income increased quarter by quarter and became a booster of performance growth.

2021 annual net fee and commission income of RMB47.573 billion was achieved, representing a year-on-year increase of 5.52% and an increase of 2.19 percentage points compared with the growth rate in the first three quarters. Among them, wealth management related business was the main growth point. Fee income from wealth management business was RMB11.775 billion, an increase of 19.47% year-on-year.

The scale of retained non-money market funds sold on behalf of the Bank was RMB304.3 billion, ranking fifth in the banking industry in the ranking of agencies sold on behalf of the Bank as announced by the China Association of Fund Industry.

The Bank said that the capital market has been volatile since the beginning of 2022, but wealth management will remain the "main focus" for growth in the future.