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Despite the increasing downward pressure on China's economy and frequent Sino-US economic and trade negotiations, the newly released semi-annual reports of large Chinese-funded commercial banks show that they have not been significantly impacted. Even if the new LPR (loan market quotation rate) mechanism introduced by the central bank makes the net interest margin of banks decline by almost a certain number, its impact on them is very limited.
Since this year, large banks have responded to the call of decision-makers to increase loans to high-risk private and small enterprises, which once caused the market to worry about the rising non-performing loan rate of such banks. However, at the performance conference, bank executives apparently knew the quality of their assets for a long time to come.
"LPR application certainly has an impact on ICBC's NIM (net interest margin), but the impact is limited." Gu Shu, President of Industrial and Commercial Bank (601398.SS) (1398.HK), said at a performance conference.
He further explained that, on the one hand, as early as 2013, when the LPR centralized quotation mechanism was launched, ICBC has been promoting LPR pricing throughout the bank, with rich experience in practice. Nowadays, in the first half of this year, the newly issued linked LPR loans of ICBC accounted for 48% of all new loans, which is about 1.4 trillion RMB. Especially, the pricing of corporate loans by LPR is very familiar to ICBC.
However, according to the central bank's statement, the interest rate will remain basically stable after the application of LPR, so the implementation of the new LPR mechanism has limited impact on ICBC.
On the other hand, ICBC's net interest margin level is mainly determined by the operating characteristics of its assets and liabilities, and the interest rate level is also based on the principle of risk pricing. On the asset side, we should pay attention to adjusting the asset structure according to the trend of market interest rate, control the asset duration when judging the interest rate going up, and consider how to increase the use of medium and long-term funds when the interest rate goes down.


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