Bank Of Communications earnings conference transcript: How was the net profit of 93.6 billion earned? Loan growth in the past two months exceeds the same period last year

On March 21, 2025, Bank of Communications was the first among the six major state-owned banks to release its 2024 annual report. The announcement showed that last year, the bank achieved a net profit of 93.586 billion yuan, a year-on-year increase of 0.93%; it achieved net operating income of 260.269 billion yuan, a year-on-year increase of 0.87%. The result of both revenue and profit showing positive growth is quite good for a "giant" bank like Bank of Communications, which has assets of 15 trillion yuan. That evening, Bank of Communications immediately held an annual performance press conference, attended by Vice Chairman, Executive Director, and President Zhang Baojiang, Executive Director and Vice President Yin Jiuyong, Executive Director and Vice President Zhou Wanfu, Vice President and Chief Information Officer Qian Bin, Vice President Gu Bin, Board Secretary He Zhaobin, and heads of relevant departments and subsidiaries of the bank also attended the meeting. Analysts from major securities firms also gathered to listen to the bank's executive team discuss their analysis of performance, operations, and future plans. The main points of the related exchanges were recorded by Zhi Shi Tang. Four "Characteristics" President Zhang Baojiang first summarized the performance and market characteristics of Bank of Communications in 2024: Moving forward in a complex market environment, the business scale steadily increased, profitability remained resilient, asset quality continued to solidify, and the annual increase in A-shares and H-shares exceeded 40%. He reminded to pay attention to four characteristics of the bank's performance: First, rooted in the real economy, empowering the development of new productive forces. In the past year, the bank efficiently implemented a package of incremental policies to stabilize the economy, increasing support for major national strategic key areas and weak links. The loan growth rate in the manufacturing sector's medium- and long-term strategic emerging industries, inclusive finance, and other areas was higher than the overall loan growth rate throughout the year. The proportion of loans in key regions such as Beijing-Tianjin-Hebei, the Greater Bay Area, and the Yangtze River Delta continued to increase. Second, optimizing asset-liability management to cultivate new momentum for high-quality development. On the asset side, the bank vigorously optimized regional layout and term structure, focusing on increasing the proportion of value-creating key areas and low capital consumption, high-yield assets; on the liability side, it greatly expanded low-cost liabilities, leading to a 19 basis point decrease in interest-bearing liability costs. In addition, it deeply explored the growth potential of non-interest income, with the group's net revenue and net profit showing a positive trend quarter by quarter since the second half of the year. Third, strengthening digital empowerment to promote the transformation of financial services. The bank is unwaveringly advancing the construction of a new digital Bank of Communications, accelerating the reshaping of technology, business, channels, processes, and product services, and focusing on building various ecological scenarios that serve government affairs, people's livelihoods, industrial operations, and consumer life. It emphasizes leveraging the value of data elements to empower precise customer acquisition, financing credit enhancement, risk measurement, and management decision-making, exploring the establishment of a digital operation center, and developing a new pattern of online retail business operations. Fourth, maintaining a risk bottom line and improving the level of comprehensive risk management. The bank always insists on risk management as a lifeline, adhering to bottom-line thinking and extreme thinking, continuously enhancing the ability for early identification, early warning, early exposure, and early disposal, effectively responding to changes and shocks in the external environment, continuously improving the management level of network security, data security, and system security, and safeguarding against systemic risks How to Achieve Dual Growth in Revenue and Profit? Vice President Zhou Wanfu stated that last year, the revenue and profit of Bank of Communications maintained relatively stable growth, which is hard-won. There are two main reasons for this: First, the net interest income, which serves as the revenue foundation, has maintained steady growth; Second, the asset quality has continued to show a stable and improving trend. Looking ahead to 2025, including the first quarter and the entire year, there are both pressures and favorable factors. The current operating environment still faces challenges from unfavorable factors such as insufficient demand, narrowing interest margins, and numerous risk hidden dangers. These factors indicate that revenue and profit growth will face significant pressure, especially in the first quarter, which may be more difficult. However, on the other hand, favorable factors are also increasing. The main reason is that the national package of incremental policies is gradually taking effect, and the economy is steadily improving, providing a good policy and market environment for the development of bank business and revenue growth. To better stabilize annual revenue and profit, Bank of Communications will take the following four measures: First, continue to strengthen net interest margin management. On the asset side, persist in expanding the total amount and optimizing the structure. On the liability side, better coordinate the balance of quantity and price, increase structural optimization efforts, actively expand low-cost liabilities, and strengthen the refined management of deposit costs to continuously reduce liability costs. Second, focus on developing intermediary businesses, enhancing the design, combination, and delivery capabilities of all types of wealth management products. Implement a one-customer-one-policy product configuration strategy around customers' differentiated needs, continuously enhance wealth management business. In addition, leverage the group's comprehensive operations and full-license advantages, strengthen the coordination between offshore and onshore, as well as domestic and foreign parent and subsidiary businesses, to meet customers' comprehensive financial service needs while broadening the sources of diversified fee income. Third, solidify the customer base and enhance value creation capabilities. Fully implement the customer base enhancement project, strengthen the full-chain operational capabilities of customers, and reinforce stratified and categorized operational strategies. Continuously promote the improvement of the corporate 4+1 customer management system and the retail 4-layer customer operation system, and solidly advance the refined management of customer groups. Utilize opportunities from digital transformation and online operations to expand the scope of customer services, creating value while providing efficient and convenient financial services. Fourth, further consolidate asset quality and strengthen comprehensive risk management. Bank of Communications will enhance risk prevention in key areas, achieve precise risk measurement and adequate provision allocation, and promote revenue and profit growth with stable asset quality. Rapid Loan Growth in the Past Two Months Vice President Zhou Wanfu specifically addressed issues related to loan business, stating that since the beginning of this year, Bank of Communications has actively increased support for the real economy, and various loans have maintained a rapid growth rate. In the past two months, the total loan growth of Bank of Communications has exceeded the same period last year, with both corporate loans and retail loans showing higher increments (scales) than last year. For the annual credit growth target, focusing on the responsibility and mission of serving the main force of the real economy, as well as the requirements for its own high-quality development, Bank of Communications has set a credit growth plan and target of “total increase, optimal structure, and stable rhythm.” In terms of "total increase," the total loan growth for the year is expected to be higher than last year's increment. In terms of "structural optimization," first, the proportion of loans related to the five major articles should be increased, and second, the share of retail loans in total loans should be enhanced. In terms of "steady rhythm," the policy guidance from the People's Bank of China regarding balanced loan issuance will be followed, with plans to allocate approximately 60% of loan issuance in the first half and 40% in the second half of the year. Zhou Wanfu also mentioned that last year, Bank of Communications achieved significant results in its retail loan business, with an increase of 11.29%. The incremental share in total loans was 40.96%, and the stock share was 32.17%, an increase of 1.09 percentage points compared to the end of the previous year, which is quite rare among major banks. For this year, Bank of Communications has also developed positive plans for retail loans, expecting the increment to be higher than last year, and the proportion in total loans will further increase. From the perspective of the four categories of personal loans, in terms of housing loans, with the implementation of a series of policies to promote the stable development of the real estate market, the real estate market is recovering and developing positively, and residents' consumption confidence is gradually restoring, leading to a year-on-year increase in personal housing loans. Secondly, for consumer loans, especially comprehensive consumer loans, Bank of Communications has maintained a relatively fast growth rate. Thirdly, business loans have seen a decline in financing demand for personal business owners due to factors such as capital recovery before the Spring Festival and the Spring Festival holiday, resulting in a slowdown in loan growth in the first quarter. This phenomenon is not only present in Bank of Communications but is also a common issue in the entire market. Finally, regarding credit card business, the overall market is showing a downward trend, and Bank of Communications is no exception. However, with the gradual effectiveness of policies to boost consumption, the situation is expected to improve gradually. Stable Growth of Corporate Credit Vice President Yin Jiuyong introduced that in 2024, the substantive RMB loans to corporate clients from Bank of Communications increased by 436.3 billion yuan, with a growth rate of 9.54%, which is relatively high. Bank of Communications will continue to increase support for the real economy and promote stable growth in the total amount of corporate credit. In 2025, the plan for corporate credit issuance is to arrange an increment of 480 billion yuan for the year, with a focus on serving the real economy, centering around the five major articles and major national and provincial projects, including manufacturing, rural revitalization, and strategic emerging industries, which are key areas with good overall development momentum. Regarding the situation of credit issuance from the beginning of the year to now and the project reserves for credit demand in the first and second quarters, as of the end of February, the substantive RMB loans to corporate clients increased by nearly 200 billion yuan compared to the beginning of the year, achieving a year-on-year increase. The demand for corporate credit from Bank of Communications in the first quarter is also relatively good, and it is expected to maintain a steady growth trend overall. Bank of Communications will make every effort to promote the expansion and quality improvement of project reserves, focusing on key areas such as dual new and dual heavy, inclusive finance for manufacturing, green development, technological innovation, and rural revitalization. At the same time, Bank of Communications will support its branches in reserving a batch of key quality projects based on the characteristics and priorities of local industrial economic structures Make Full Use of Policies and Seize the Window Period Yin Jiuyong also stated that recently, the central government and regulatory authorities have successively introduced a series of strong policy measures. Bank of Communications will act accordingly, make full use of relevant policies, and seize the window period, comprehensively enhance the supply capacity of finance, and achieve reasonable growth in loan issuance and effective qualitative improvement. Regarding the credit demand situation in various regions across the country, as of the end of February, Bank of Communications has seen good growth in corporate loans at its branches in key regions such as the Yangtze River Delta, Guangdong-Hong Kong-Macao, and major economic provinces, with growth rates in these areas exceeding the bank's average level. The focus remains on the Shanghai area, where it will continue to leverage its home advantage and further increase support for the economic and social development of Shanghai. It is believed that the share of corporate credit will continue to rise throughout the year. At the same time, attention will be paid to the current regional pattern of corporate credit demand, which is still dominated by economically developed areas, with policy direction aimed at technology, green initiatives, and infrastructure, which will also be core growth points for loan growth in the future. Interest Margin Environment Expected to Improve This Year In the 2024 report, Bank of Communications' interest margin is very prominent, remaining basically stable. Can this trend be maintained in the future? Zhou Wanfeng introduced that in recent years, banks have faced significant pressure on their interest margins. In 2024, Bank of Communications has maintained the basic stability of its interest margin through unremitting efforts. Looking ahead to 2025, it is expected that interest margins will still face certain downward pressure in the short term. This is mainly due to the continued impact of policy factors such as the LPR reduction and adjustments to existing mortgage rates, as well as downward pressure on asset yields in the context of weak effective demand and intensified industry competition. At the same time, the liability side is also affected by changes in the external environment and customer preferences. Currently, the deposit structure still shows a trend towards more fixed-term and long-term deposits, which somewhat suppresses the overall decline in the average cost rate of deposits. However, compared to the previous two years, the situation this year is expected to improve. There are some supporting factors that may have a positive impact on stabilizing or enhancing the net interest margin. First, on the asset side, as the effects of a series of incremental policies gradually become apparent, the positive factors supporting economic recovery are increasing, creating favorable conditions for the development of the banking industry. In addition, the role of the interest rate self-discipline mechanism is becoming increasingly strong, providing favorable conditions for regulating the competitive order of the deposit and loan market, reducing liability costs, and stabilizing asset yields. These factors constitute a relatively optimistic outlook for this year's interest margin situation. For Bank of Communications, in the current macro environment, it will fully utilize favorable policy opportunities and market opportunities by optimizing the asset-liability structure, dynamically adjusting pricing strategies, and continuously enhancing the management level of net interest margin. On one hand, it will continue to increase the proportion of customer loans, loans related to the five major articles, and retail loans, while strengthening the management of diversified product portfolios such as bond investments. On the other hand, it will focus on retaining settlement funds, vigorously expand low-cost deposits, and effectively manage high-cost deposits to continuously reduce liability costs. There is Room for Improvement in Non-Interest Income Zhou Wanfu mentioned that in the past two years, the growth of non-interest income for banks has been affected by various factors and has faced significant pressure. In the past year, the non-interest income of Bank of Communications also experienced a certain degree of negative growth. Looking at this year's situation, with the implementation of the national package of incremental policies, especially the effectiveness of policies such as stabilizing the stock market, stabilizing the real estate market, and boosting consumption, the relevant fee-based businesses in the banking industry are expected to gain greater development space. In addition, from a year-on-year perspective, the impact of policies such as the integration of reporting and banking and fund management fee rates on the growth of non-interest income will decrease. He expects that overall, the growth rate of fee income in the banking industry is likely to achieve marginal improvement, performing better than last year. For Bank of Communications, it will promote the recovery of fee income by providing customers with higher quality and more professional services in the process of serving the real economy. The main growth potential points include several aspects. First, in wealth management, as the growth rate of market interest rates declines, especially with the reduction of deposit rates, the attractiveness of stable investment products such as wealth management and low-volatility fixed-income funds has increased, and the cost-effectiveness of allocation has improved. Second, in the credit card business, due to the special actions implemented this year to boost consumption, it is expected to promote consumption growth, which is a positive factor for the bank's related income. Bank of Communications will seize the policy opportunities to promote consumption, increase efforts to boost consumption, and conduct promotional activities in scenarios such as trade-in, cultural tourism, home appliances, dining, shopping, and travel, as well as online and offline marketing activities, to meet the growing consumer demand of customers and enhance their overall contribution. In this regard, it plans to promote the localization transformation of credit card business to release the dividends of reform. In terms of business strategy, it will continue to provide comprehensive, in-depth, and high-quality customer service and operations, focusing on customer acquisition and activation, installment payments, risk control, and enhancing payment share in scenarios such as smart home, cultural entertainment tourism, sports events, and domestic products. Thirdly, Bank of Communications will leverage its advantages in internationalization and comprehensiveness to expand and maintain its cross-border customer base, strengthening integrated financial services in both domestic and foreign currencies. At the same time, it is committed to expanding international settlement business and consolidating its advantageous position in areas such as foreign exchange settlement and sales, international letters of credit, and cross-border remittances. Investment and Exchange Rate Gains Worth Noting In other aspects of non-interest income, last year, Bank of Communications achieved investment valuation and exchange rate gains and losses of 24.303 billion yuan, an increase of 173 million yuan year-on-year. Specifically, the total investment income and net gains from fair value changes amounted to 29.578 billion yuan, an increase of 2.36 billion yuan year-on-year, with a growth rate of 8.67%. The net loss from exchange rate and currency products was 5.275 billion yuan, with a year-on-year loss increase of 2.188 billion yuan, mainly due to the increase in the scale of swap business, leading to a year-on-year rise in swap costs. Overall, in 2024, the investment valuation and exchange rate gains and losses of Bank of Communications accounted for 9.34% of the group's total income, a ratio that is basically the same as in 2023, and is an important component of the group's revenue Next, Bank of Communications will further enhance the trading capabilities of various financial products, increase trading volume, and strengthen dynamic monitoring of investment exposure and targets to reduce the impact of market fluctuations, maintaining investment valuation and foreign exchange gains and losses within a relatively reasonable range. Practical Application of AI Large Models Qian Bin, Chief Information Officer of Bank of Communications, emphasized during the introduction of digital transformation that the bank always adheres to the principle of drawing a blueprint to the end, making the construction of a new digital Bank of Communications an important breakthrough in promoting the group’s strategic advancement, to facilitate the coordinated development of five major articles. Two key figures are that the bank's technology investment accounts for 5.41% of revenue, and technology personnel account for 9.44% of the total number of employees in the group. These two figures are quite high among peers, reflecting the determination and confidence of the bank's senior management in digital construction. In 2024, the bank strengthened the foundation and resource guarantee for business continuity. The construction of two remote data centers in Inner Mongolia and Guizhou is accelerating, and the disaster recovery system has been further improved, effectively enhancing disaster recovery capabilities. At the same time, the bank has strengthened data governance and application integration, actively connecting with the national credit loan platform and various local big data institutions, cumulatively accessing 130 national external data sources and establishing cooperation with over 300 data platforms. By utilizing blockchain and privacy computing technologies, it empowers the accuracy of customer acquisition financing, credit reporting, and risk measurement. In 2024, the bank received the highest domestic certification for data management capability maturity, and further leveraged the engine role of artificial intelligence, establishing a heterogeneous computing power cluster primarily based on domestic GPU servers, which is relatively large in the financial industry. It has built a financial large model algorithm matrix worth hundreds of billions, completing the construction of over 100 large and small model scenarios, releasing more than 1,000 labor forces throughout the year. Regarding artificial intelligence large models, Qian Bin stated that the bank has always paid close attention to the development of artificial intelligence technology. In recent years, the bank has mainly promoted the application of artificial intelligence around four aspects: cost reduction, risk control, value creation, and experience optimization. Considering the uncertainties in the application of artificial intelligence, the bank's basic strategy is to first focus internally and then externally, first partially and then wholly, prioritizing cost reduction and risk control. In terms of cost reduction, by using technologies such as RPA (Robotic Process Automation) and OCR (Optical Character Recognition), the bank has significantly reduced the workload of manual data collection, entry, and verification in areas such as credit risk control, achieving remarkable results. The bank promotes human-machine collaboration, combining large models and small models with rules to achieve one-click generation of loan due diligence reports and inclusive credit reports, significantly reducing the time for customer managers to write reports, saving over 50% of the time. In the field of risk control, AI model construction for anti-money laundering and anti-telecom fraud has been carried out, which not only improves the accuracy of identification but also reduces the task volume of suspicious event verification in anti-money laundering by 35%, and decreases the processing time for anti-telecom fraud tasks by 30%. In terms of value creation, the bank has enhanced the profiling capabilities of retail customers, supporting branches in autonomously configuring intelligent marketing strategies, resulting in a more than fourfold increase in the sales conversion rate of large-denomination certificates of deposit In terms of optimizing the experience, technology is applied to channel construction, utilizing digital human technology and building new online service channels for Bank of Communications. Overall, Bank of Communications will actively grasp the development trend of artificial intelligence technology, deepen its application in core business areas, and further release the dividends of intelligence. Currently, it has officially launched the Bank of Communications Artificial Intelligence + Action Plan, which is planned to promote innovative practices of artificial intelligence at a deeper level and broader scope during the period from 2025 to 2026. Asset Quality Remains Stable and Improving In recent years, the asset quality of Bank of Communications has been relatively outstanding in the industry. Vice President Gu Bin provided an interpretation of this. He introduced that in 2024, Bank of Communications will continue to promote actions to strengthen post-loan management, maintaining a stable and improving trend in asset quality. As of the end of 2024, the non-performing loan ratio of Bank of Communications was 1.31%, a decrease of 0.02 percentage points from the end of the previous year; the expected loan ratio was 1.38%, unchanged from the end of the previous year; the attention loan ratio was 1.57%, an increase of 0.06 percentage points from the end of the previous year. Since the beginning of 2025, Bank of Communications has continued to orderly advance risk resolution measures in key areas, playing the role of a leading state-owned bank, coordinating business development and risk control, and is confident in maintaining stable asset quality in 2025. Of course, in terms of asset quality control, Bank of Communications still faces some pressures: First, the endogenous cash flow of some real estate enterprises has not fully recovered, and project sales have not completely warmed up, leading to pressure on related loans to downgrade to non-performing. Second, since last year, the banking industry has generally reported an overall increase in retail business risks, which is expected to bring certain pressure on overall asset quality this year. Third, the international situation is complex, requiring further prevention of external shocks affecting certain enterprises (clients) of Bank of Communications, which may also pose pressure on asset quality control. In the next stage, Bank of Communications will continue to deepen the implementation of key work to prevent and resolve risks, firmly adhering to the bottom line of not allowing systemic risks to occur. Trend of Time Deposits is Obvious Regarding the trend of time deposits, Zhou Wanfu introduced that the statistical data released by the People's Bank of China showed that last year, the annual growth of M1 decreased by 1.4%, while M2 grew by 7.3%. The significant difference in the growth rates of M1 and M2 clearly reflects the trend of time deposits in the banking industry. The situation of Bank of Communications is generally consistent with the overall market trend, continuing to show characteristics of time deposits. Throughout last year, the balance of demand deposits decreased by 24 billion compared to the end of the previous year, while the balance of time deposits increased by 253.7 billion. The proportion of time deposits reached 64.98%, an increase of 1.08 percentage points from the end of the previous year. For the growth and pricing of deposits in 2025, a moderately loose monetary policy provides a good environment for the overall growth of deposits. With the steady recovery of economic activity, the gradual rebound of residents' consumption and investment tendencies, it is expected that the structure of deposit growth will improve, and the trend of time deposits may be alleviated to some extent In addition, with multiple reductions in the listed interest rates, the rectification of manual interest supplementation for deposits, and the strengthening of the self-discipline mechanism for deposit interest rates, it is expected that this year's deposit rates will steadily decline under the combined effect of these factors. These will have a positive contribution to improving the interest margin. Dividend Rate Exceeds 30% for 13 Consecutive Years Secretary of the Board He Zhaobin mentioned that this morning, the Board of Directors of Bank Of Communications has approved the profit distribution plan for 2024, which will distribute a cash dividend of 0.197 yuan per share, totaling 14.6 billion yuan. Including the semi-annual dividend for 2024 that has already been distributed in January this year, the total cash dividend distribution for Bank Of Communications in 2024 will be 0.379 yuan per share, with a total cash dividend distribution of 28.146 billion yuan, accounting for nearly 33% of the net profit attributable to ordinary shareholders of the parent company. With this dividend, Bank Of Communications' cash dividend rate has remained above 30% for 13 consecutive years. He Zhaobin stated that Bank Of Communications attaches great importance to shareholder returns and actively implements the regulatory requirements regarding dividends, maintaining a long-term stable dividend policy. For the past 13 years, Bank Of Communications has had clear dividend expectations and stable dividend ratios, and since last year, it has increased the frequency of dividends, effectively enhancing shareholders' sense of gain and conveying confidence in the long-term development of Bank Of Communications to investors. He provided several data points: the dividend yield for Bank Of Communications' A shares averaged 7.43% in 2022, 6.77% in 2023, and 5.41% in 2024; the dividend yield for H shares averaged 8.58% in 2022, 8.5% in 2023, and 7.35% in 2024. He Zhaobin also stated that in the future, Bank Of Communications will continue to maintain the continuity, stability, and predictability of its dividend policy. Bank Of Communications is confident in maintaining a stable and improving operational situation, continuously enhancing profitability, and sharing the results of its operational development with shareholders through good performance and stable dividends. 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