In 2023, it was quite difficult for operators in the banking industry. Even the &#34;Retail King&#34; China Merchants Bank (600036.SH) encountered a situation of shrinking revenue and a year-on-year decline in net interest income. By the first quarter of 2024, China Merchants Bank's revenue showed negative growth again, and net profit also experienced negative growth for the first time in over a decade. Along with this decline was the net interest margin, which stood at only 2.02% by the end of the first quarter, a decrease of 27 basis points year-on-year.
Securities Star noted that another major challenge facing China Merchants Bank is frequent regulatory penalties. In the past June, China Merchants Bank's branches in Chengdu and Harbin received million-level fines on the same day, involving a wide range of illegal activities.
In July, China Merchants Bank's credit card center was fined 800,000 yuan for providing misleading information, and some employees even faced lifetime bans. The frequent penalties to some extent exposed the loopholes in China Merchants Bank's compliance management, posing a severe test to its reputation and operational stability.
Revenue and net profit both declined in the first quarter
According to the financial report, in 2023, China Merchants Bank's operating income was 339.123 billion yuan, a year-on-year decrease of 1.64%; net profit attributable to equity holders was 146.602 billion yuan, a year-on-year increase of 6.22%; net interest income was 214.669 billion yuan, a year-on-year decrease of 1.63%; and non-interest net income was 124.454 billion yuan, a year-on-year decrease of 1.65%.
In the first quarter of 2024, China Merchants Bank achieved operating income of 86 billion yuan, a year-on-year decrease of 4.65%; and net profit of 38.1 billion yuan, a year-on-year decrease of 1.96%.
Among them, net interest income was 52 billion yuan, a year-on-year decrease of 6.15%, accounting for 60.17% of operating income. During the same period, the net interest margin was 1.90%, and the net interest yield was 2.02%, both down by 28 basis points and 27 basis points year-on-year, respectively, and also showing a slight decrease compared to the previous period.
Securities Star noted that from 2021 to 2023, China Merchants Bank's net interest margin was 2.39%, 2.28%, and 2.15% respectively. By the end of the first quarter of 2024, the net interest margin further dropped to 2.02%.
At China Merchants Bank's 2023 annual general meeting, President Wang Liang responded to investor questions by stating that this year, the bank's core indicators of revenue and profit will continue to face dual pressures. The bank's net interest margin decreased by 27 basis points in the first quarter of this year, mainly due to the repricing impact of the LPR reduction.
Meanwhile, the once prominent wealth management business at China Merchants Bank, which performed well in the annual report, is now facing challenges. The first quarter report shows that the bank's wealth management fee and commission income was 6.141 billion yuan, a year-on-year decrease of 32.59%. Agency insurance income was 2.524 billion yuan, a significant decrease of 50.28%; and agency fund income was 1.026 billion yuan, a decrease of 32.68%.
As is well known, the net interest margin is an important indicator of a bank's profitability. A continuous decline in this indicator indicates increased difficulty for banks in generating interest income. Furthermore, the simultaneous decline in net interest margin and net interest yield reflects the adaptability and profit stability of banks under the background of interest rate liberalization facing challenges
China Merchants Bank, which once prided itself on its large wealth management business, has experienced a significant decline, indicating that changes in the market environment and customer demand are impacting the bank's non-interest income. The weakness in wealth management not only affects the bank's overall revenue structure but may also pose challenges to its brand and market position.
Large fines within one month
On July 2nd, the Heilongjiang Regulatory Bureau of the China Banking and Insurance Regulatory Commission announced administrative penalty information, imposing a fine of 2.4 million RMB on the Harbin branch of China Merchants Bank.
Upon investigation, the Harbin branch of China Merchants Bank was found to have artificially adjusted corporate sales figures leading to inaccuracies in the classification of small and micro enterprises, as well as errors in the statistics of loans to small and micro enterprises. Additionally, there were multiple illegal and irregular activities such as inadequate post-loan management, real estate development loan funds flowing back to borrowers or their related enterprises.
On the same day, the Sichuan Regulatory Bureau of the China Banking and Insurance Regulatory Commission announced administrative penalty information for the Chengdu branch of China Merchants Bank: the Chengdu branch of China Merchants Bank fabricated financial advisory fee documents and profited from them, inadequately conducted the &#34;three checks&#34; for loans, misappropriated loan funds, had irregularities in the sources and uses of entrusted loan funds, and engaged in illegal bank acceptance bill discounting business, among other illegal and irregular activities, resulting in a fine of 2.9 million RMB.
Securities Times noted that both penalties were issued on June 25th, meaning that China Merchants Bank was fined over 5 million RMB on the same day. In fact, China Merchants Bank has been frequently subjected to high penalties by regulators recently.
On July 10th, the website of the China Banking and Insurance Regulatory Commission published an open table of administrative penalty information, showing that due to providing materials that concealed important facts and inadequate employee behavior management, the Shanghai Regulatory Bureau of the China Banking and Insurance Regulatory Commission fined the Credit Card Center of China Merchants Bank a total of 800,000 RMB.
In addition to penalizing the bank, Zhao Jingyuan, a customer manager of the online mall business department of the Electronic Commerce Project Team of the Credit Card Center of China Merchants Bank at the time, was directly responsible for inadequate employee behavior management at the Credit Card Center of China Merchants Bank and was banned from working in the banking industry for life.
Furthermore, on June 28th, the China Banking and Insurance Regulatory Commission announced administrative penalty information, revealing the following illegal and irregular behaviors in the wealth management business of China Merchants Bank: failure to effectively identify underlying assets and non-standard information disclosure. In accordance with relevant laws and regulations, the regulatory authorities imposed an administrative penalty of 3.5 million RMB on China Merchants Bank.
At the same time, China Merchants Bank's subsidiary, China Merchants Fund Management Co., Ltd. (referred to as &#34;China Merchants Fund Management&#34;), was fined 8.5 million RMB for failing to effectively identify underlying assets and non-standard information disclosure

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China Merchants Bank has recently been frequently fined by regulators, with a credit card center employee being banned for life. Since 2023, China Merchants Bank's revenue and net profit have both declined, and the net interest margin has also dropped to 2.02%. In addition, China Merchants Bank faces loopholes in compliance management, with its reputation and operational stability facing severe tests

China Finance Online

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China Merchants Bank receives regulatory penalty "frequent visitor": fined over tens of millions within the past month, one employee from the credit card center banned for life