The first change is that the banking industry is facing a major change in competition for deposits. Competition for bank deposits is reshaping the landscape of the banking industry
For banks, deposits are always the lifeline of the bank. Competition among banks always begins with competition for people's deposits. The previous deposit wars were a direct manifestation of bank competition.
Although banks will not have another deposit war in 2023, the major changes in bank deposits in 2023 will still trigger a reshaping of the competitive landscape of the banking industry.
The focus of bank deposit competition in 2023 is not the scale of deposits. Next year, the scale of bank deposits should have a more ideal expansion, but this expansion does not mean that all banks will grow at the same speed. On the contrary, the loose funding pattern of the deposit market next year may not be friendly to those small and medium-sized banks.
According to central bank data, at the end of November 2022, the balance of domestic and foreign currency deposits of my country's banking financial institutions was 263.96 trillion yuan, a year-on-year increase of 611.1%; the balance of RMB deposits of my country's banking financial institutions was 6257.78 trillion, a year-on-year increase of 11.6%. With the recovery of my country's economic situation in 2023 and the moderate monetary easing to support the economic recovery, it is an uncontroversial conclusion that the money supply will grow moderately. The total deposits of banking financial institutions will also continue to grow in 2023.
However, while the total deposits of financial institutions in the banking industry are still expanding rapidly, it is a world of ice and fire for different types of banks. The deposit growth of the six major state-owned banks is still in a state of not having to worry about food and drink, just like the deposit competition at the end of 2022. The six major state-owned banks are basically in the "Buddhist style"; and the 12 national joint-stock companies Commercial banks may be further differentiated in terms of deposits. Those with no shortage of deposits will continue to move closer to the six major state-owned banks, while those with relatively weak competition in the bank deposit market will still be in a weak position; while local city commercial banks and rural commercial banks are still at the bottom of the deposit competition and are the most fierce competition for deposits in the market. .
More importantly, the focus of competition for deposits among all banking financial institutions is not the total amount, but the competition in bank deposit interest rates. Judging from the deposit sprint at the end of 2022, the 3-year time deposit interest rate of large state-owned banks does not exceed 3%, while the interest rate of 3-year time deposits of a local commercial bank with a minimum deposit of 50 yuan exceeds 3.4%; the 3-year and 5-year time deposit interest rates of a small bank with a minimum deposit of 10,000 yuan reach 4% and 3.9% respectively.
A large state-owned bank's currently listed interest rates for six-month regular lump sum deposits and withdrawals within one year are 1.7%, the one-year term is 1.9%, the two-year term is 2.4%, and the three-year term is 3%; while a national joint-stock company The interest rates for deposits starting from 100 yuan in private banks are 1.5% for 3 months, 1.7% for 6 months, and 1.95% for 1 year, which are higher than the deposit levels of large state-owned banks; the deposit interest rates of local urban commercial banks and rural commercial banks are even higher. Some national joint-stock banks and local banks will continue to raise deposit interest rates to compete and increase deposits to support their own funding needs.
More importantly, the competition for deposits between banks will also be reflected in large-denomination certificates of deposit . The large-denomination certificates of deposit quotas of large state-owned banks will be further tightened, and at the same time, the interest rates on large-denomination certificates of deposit will continue to be reduced. The strategies of national joint-stock banks for large-denomination certificates of deposit will be further differentiated. They will follow the large-denomination certificates of deposit interest rate strategy of large state-owned banks, and some banks will use large-denomination certificates of deposit as a means of competition for deposits; local banks will attract more deposits through large-denomination certificates of deposit, but they will all face huge pressure on deposit costs. This is the core and fundamental of competition.
In the second change, the banking industry is facing a major change in loan competition, and high-quality loan resources will test the core competitiveness of banks.
The uneven joys and sorrows in the banking industry and the "ice and fire" deposit competition situation directly affect the loan competition pattern of the banking industry, and because of the changes in loan competition in the banking industry, the core competitiveness of banks is tested.
In 2022, in order to implement policies and measures that are conducive to economic stability, loans from banking financial institutions have achieved rapid growth. Relevant data shows that at the end of October 2022, the loans of banking financial institutions increased by 18.7 trillion yuan during the year, an increase of 1.15 trillion yuan year-on-year; the recovery and stimulation of the real economy in 2023 will create greater demand for financing , which will form a small peak in demand for bank loans. This is a great benefit to the banking industry’s loan offering.
In 2023, China will further increase its support for market entities in terms of economic and financial policies. On the one hand, the banking industry must effectively promote the reasonable growth of economic volume through the effective release of credit, and increase efforts to support stable growth, stable employment, and stable prices; on the other hand, the banking industry must help build a modern industrial system, accelerate the construction of a new development pattern, and vigorously support the effective improvement of economic quality through various financial instruments. This faces a very big problem: economic recovery and repair and stimulating economic development require the banking industry to provide larger-scale financial support, while better-quality financing entities and the real economy require lower capital costs. In addition, various inclusive finance needs to lower financing interest rates. The banking industry is facing the triple overlapping pressure of a shortage of high-quality financing assets, a shortage of high-interest financing needs, and inclusive finance requiring lower capital costs.
Competition for high-quality assets has always been the core competitiveness of the banking industry, while competition for high-interest financing needs is beneficial to buffering banks from high deposit costs. Inclusive finance is the social responsibility of the banking industry.
High-quality assets have always been the most important credit assets in the banking industry, but the loan interest rates for high-quality assets are relatively low. In 2022, in order to support industrial transformation and upgrading, my country's banking industry will increase the balance of loans to technology-based enterprises by 42.3%, and the balance of medium and long-term loans in the manufacturing industry will increase by 29.9%. It is believed that it will continue to grow in 2023. However, in the competition for these high-quality assets, only larger state-owned banks, national joint-stock banks and some larger local banks are competitive, and it is difficult for small banks of average size to effectively participate.
Distributing profits to loan entities will undoubtedly test the real underlying competitiveness of each bank. The focus in 2023 will still be on fee reductions and loan concessions. In 2022, the banking industry will provide more than 4 trillion yuan in deferred principal and interest payments for small and medium-sized enterprises, individual industrial and commercial households, truck drivers, etc. Most of these loans will expire in 2023, which will virtually increase the pressure on asset quality of these banks.
Inclusive finance is the social responsibility of banks, but at the same time, financial policies will continue to focus on reducing financing costs, which puts tremendous pressure on the deposit costs and operating capabilities of the banking industry. At the end of October 2022, the balance of inclusive small and micro enterprise loans in my country's banking industry increased by 23.8% year-on-year, the average loan interest rate dropped by 0.42 percentage points from last year, and the balance of loans exclusive to new citizens exceeded 1.2 trillion yuan. In 2023, inclusive finance will further focus on reducing financing costs to support various entities to enhance their vitality, while the banking industry will further differentiate market competitiveness.
In the third change, the profits of the banking industry are facing the test of greater changes, and the differentiation of profit growth and decline of various banks has further intensified.
my country's banks have already entered the era of meager profits or small profits in recent years. In 2023, the profit space of banks will be squeezed from three aspects. As a result, the banking industry is facing a big change in profits. Some banks' profit growth will be stronger, while some banks' profits will be further weakened.
In the first three quarters of 2022, commercial banks achieved a cumulative net profit of 1.7 trillion yuan, a year-on-year increase of only 1.2%, which is very different from the dozens of percent growth in the golden decade; and the average capital profit rate of the banking industry was 9.32%, a decrease of 0.78 percentage points from the end of the previous quarter; the average asset profit rate of the banking industry was 0.75%, a decrease of 0.06 percentage points from the end of the previous quarter.
The first profit-cutting factor in the banking industry in 2023 is that the banking industry continues to reduce fees. In 2022, 21 major banks will reduce fees for market entities by more than 140 billion yuan; in 2023, banks will continue or even increase the intensity of fee reduction and exemption policies, thereby further weakening the profitability of the banking industry.
The second factor reducing interest rates in the banking industry in 2023 is loan interest rates.Although fee reduction is more direct for economic entities, after all, the amount that can be reduced is limited. Lowering loan interest rates and providing profits is the most important activation method and method for the banking industry. In the past, my country's financial industry contributed RMB 1.5 trillion in profits to the real economy. It is unknown whether there will be greater intensity in 2023, but the impact on banking industry profits cannot be ignored.
The third factor reducing interest rates in the banking industry in 2023 is the upward factor in deposit costs. For large banks, the cost of deposits may continue to decline, but for small and medium-sized banks, the space for falling bank deposit costs is limited. If they want to expand their lending capacity, they must continue to increase the cost of deposits to raise funds.
As the entire banking industry faces triple pressures of fee reductions, loan concessions, and rising capital costs, large banks have a greater profit competitive advantage, while small and medium-sized banks, especially some small and medium-sized banks, face dual pressures of reduced revenue and rising costs, thereby achieving differentiation in bank profitability.
In 2023, the banking industry will face three major changes in deposits, loans, and profits, which will accelerate the further differentiation of the banking industry. However, the banking industry is far from entering a crisis. For those banks that plan to respond in advance, it is an opportunity for transformation. What do you think? Tell us in the comment section. (Qijian)
