Is the 18-year-old Postal Savings Bank of China feeling the pinch? It's that crucial time again when listed companies are scrutinized like under a magnifying glass by the outside world and are expected to respond to various concerns. In the past year, th

Is the 18-year-old Postal Savings Bank of China feeling the pinch?

It's that crucial time again when listed companies are scrutinized like under a magnifying glass by the outside world and are expected to respond to various concerns.

In the past year, the internal and external environments have become increasingly complex and volatile. All industries have been struggling forward, especially the banking industry. Affected by factors such as the in-depth adjustment of the macro-economy, the relatively weak domestic credit demand, and the repricing of the Loan Prime Rate (LPR), the challenges it faces are unprecedented.

Taking a glimpse at the Postal Savings Bank of China, although it is backed by the China Post Group and has a differentiated operation mode of "self-operated + agency", it has also truly felt the "pain" from the bottom of the economic cycle, which is vividly reflected in its financial reports.

01. Gradual Decline in Growth

Established in 2007, the Postal Savings Bank of China is the youngest "rising star" among the six major state-owned banks, and it turns 18 this year.

However, even in such a vibrant and youthful stage, when encountering growth obstacles such as increased volatility and upgraded uncertainties, it inevitably shows signs of fatigue, such as "losing steam" and "struggling to keep up".

The financial report shows that in 2024, the total assets of the Postal Savings Bank of China amounted to 17.08 trillion yuan, an increase of 8.64% compared to the end of the previous year; the operating revenue was approximately 348.8 billion yuan, a year-on-year increase of 1.83%.

Looking back at the timeline, from 2021 to 2023, the growth rate of the operating revenue of the Postal Savings Bank of China dropped from 11.38% to 5.08%, and then to 2.25%, showing a clear downward trend and a decline in growth momentum.

In terms of business segments, in 2024, the net interest income, which is the "mainstay" of its business, was 286.123 billion yuan, only a slight year-on-year increase of 1.83%, accounting for about 82% of the operating revenue.

Digging deeper, the common plight of the continuously falling net interest margin has made it increasingly difficult for the industry's net interest income to maintain an upward trend. According to the latest data from the National Financial Regulatory Administration, in 2024, the net interest margin of commercial banks was 1.52%, a year-on-year decrease of 16 basis points.

In the same period, the net interest margin of the Postal Savings Bank of China was 1.87%, a year-on-year decrease of 14 basis points. Although the decline rate was lower than the industry average, due to the large proportion of its net interest income, the impact should not be underestimated.

In terms of non-interest income, the Postal Savings Bank of China's performance was also mediocre: a growth rate of 3.21% and a volume of 62.652 billion yuan were both lower than market expectations.

For comparison, data from Tianyancha shows that in 2024, the non-interest incomes of Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of Communications, China Construction Bank, and Bank of China were 184.398 billion yuan, 129.863 billion yuan, 89.994 billion yuan, 160.27 billion yuan, and 181.156 billion yuan respectively, with year-on-year growth rates of -1.9%, 5.51%, -3.74%, 5.09%, and 15.87% respectively.

In recent years, the pressure of interest rate cuts has been unprecedented. Banks within the industry, including the Postal Savings Bank of China, have been actively focusing on non-interest income. They hope to find new growth engines and drive new increments by acting as agents for wealth products such as insurance, trusts, and wealth management products, providing services such as investment consulting and credit guarantees, and engaging in equity investments such as bonds, funds, and equities.

The Postal Savings Bank of China has also been actively transforming in this direction, but overall, its progress lags behind that of its peers. In 2024, among the Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of Communications, China Construction Bank, and Bank of China, except for the Agricultural Bank of China (18.28%), the proportion of non-interest income of the other five banks exceeded 20%, with the Bank of Communications having the highest proportion at 34.63%, while that of the Postal Savings Bank of China was just around 18%.

In other words, having bid farewell to the past era of rapid and substantial growth, and entering the current stage of slow progress and modest profit, the Postal Savings Bank of China still needs to make more efforts both in changing its mindset and implementing its actions.

02. The Sweet "Burden"

It is worth noting that unlike its peers that have both increased revenue and profit, the net profit attributable to the parent company of the Postal Savings Bank of China in this period was 86.48 billion yuan, only a 0.24% increase compared to 2023, almost remaining unchanged, and hitting a new low in nearly 12 years.

Consequently, the return on net assets (ROE) of the Postal Savings Bank of China continued to decline in 2024, reaching 9.84%, dropping to the lowest level in the past five years.

In comparison, in 2024, the year-on-year growth rates of the net profit attributable to the parent company of the Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of Communications, China Construction Bank, and Bank of China were 0.51%, 4.72%, 0.93%, 0.88%, and 2.56% respectively.

It is not difficult to see that the Postal Savings Bank of China ranks at the bottom in terms of profitability.

There are mainly the following reasons for this:

Firstly, relying on the business premises of the China Post Group that spread across the country, the Postal Savings Bank of China enjoys a unique "self-operated + agency" operation mode in the industry, which is also the "ballast stone" for its development and stable operation.

Benefiting from this, the Postal Savings Bank of China has been able to rapidly expand its business outlets to nearly 40,000, firmly taking the lead in the market. At the same time, it can easily extend its business to towns and villages across the country, greatly strengthening its customer coverage and deposit-taking capabilities.

However, every advantage has its downside. The other side of the coin is that the cost has to be borne somewhere. The Postal Savings Bank of China needs to pay a substantial amount of savings agency fees to the China Post Group, which has, to a certain extent, hindered its net profit.

The financial report shows that in 2024, the comprehensive agency fee rate of the Postal Savings Bank of China for the whole year was 1.15%, a year-on-year decrease of 9 basis points; the savings agency fees and others amounted to 117.814 billion yuan, a year-on-year increase of 2.51%, with the growth rate dropping by 9.89 percentage points compared to the previous year.

Although the comprehensive agency fee rate has decreased, the actual expenditure is still increasing, and earning less has become the inevitable "destiny" of the Postal Savings Bank of China.

Secondly, the trend of deposit regularization has intensified.

In 2024, the total time deposits from individuals and companies of the Postal Savings Bank of China amounted to approximately 11.24 trillion yuan, accounting for nearly 73%, an increase of 1.76 percentage points compared to 2023.

As is well known, time deposits have a higher interest payment rate. This means that the Postal Savings Bank of China has obtained more sustained and sufficient growth resources, but it has also paid a higher price.

During the reporting period, the interest expenses of the Postal Savings Bank of China were 222.120 billion yuan, a year-on-year increase of 2.58%, exceeding the overall revenue growth rate by 0.75 percentage points.

In addition, in 2024, the Postal Savings Bank of China made a provision for credit impairment losses of 28.423 billion yuan, a year-on-year increase of 8.62%, 2.256 billion yuan more than in 2023.

Since the net profit = net interest income + non-interest income - business and administrative expenses - credit impairment losses - income tax, the increase in the credit impairment losses of the Postal Savings Bank of China directly leads to a decrease in its net profit.

03. The "Double Increase" of Non-performing Loans Conceals Hidden Worries

Next, let's look at the asset quality situation of the Postal Savings Bank of China.

By the end of 2024, the balance of non-performing loans of the Postal Savings Bank of China was 80.319 billion yuan, an increase of 12.859 billion yuan compared to the end of the previous year, a year-on-year surge of 19.06%; the non-performing loan ratio was 0.9%, an increase of 0.07 percentage points compared to 0.83% in 2023.

In a horizontal comparison, the relevant indicator of the Postal Savings Bank of China has remained below 1% for many years, demonstrating long-term stability. However, focusing on this period, it is the only bank among the six major state-owned banks that has seen a "double increase" in non-performing loans.

Specifically, for personal loans, by the end of 2024, the non-performing loan ratio of personal credit of the Postal Savings Bank of China was 1.28%, an increase of 0.16 percentage points compared to the previous year.

Among them, the non-performing loan ratio of personal small loans was 2.21%, a sharp year-on-year increase of 0.48 percentage points, which was the sub-item with the largest growth rate during the reporting period and significantly pulled up the overall non-performing loan ratio of the Postal Savings Bank of China.

Huachuang Securities analyzed that retail loans often expose risks relatively quickly and can be disposed of and cleared out relatively fast. With the gradual economic recovery and the improvement of residents' income expectations, the non-performing loan ratio of retail loans is expected to be kept within a controllable range. The Postal Savings Bank of China has always had a light asset quality burden and relatively strict risk control measures, and it is expected that its asset quality will remain stable in the future.

In terms of categories, the balance of special-mention loans of the Postal Savings Bank of China was 84.328 billion yuan, an increase of 29.376 billion yuan compared to the end of the previous year; the proportion of special-mention loans was 0.95%, an increase of 0.27 percentage points compared to the end of the previous year; the proportion of special-mention and non-performing loans was 1.85%, an increase of 0.34 percentage points compared to the end of the previous year.

Generally speaking, the changes in non-performing loans and special-mention loans are positively correlated. In other words, special-mention loans are the most likely to be converted into non-performing loans, and the Postal Savings Bank of China has a potential risk of further expansion of non-performing loans.

It is particularly important to note that the migration rate of normal loans of the Postal Savings Bank of China has been on an upward trend for three consecutive years. By the end of 2022, 2023, and 2024, it was 0.89%, 0.95%, and 1.1% respectively.

This may indicate that among the normal loans of the Postal Savings Bank of China, more loans are at risk of default or downgrade, but the overall increase is relatively small.

In fact, the increase in the credit impairment losses of the Postal Savings Bank of China mentioned above also more or less reflects the pressure on the asset quality of the bank.

In terms of capital security, by the end of 2024, the provision coverage ratio of the Postal Savings Bank of China was 286.15%, ranking second among the six major state-owned banks, indicating strong risk compensation capabilities.

However, in this period, the provision coverage ratio of the Postal Savings Bank of China decreased by 61 basis points compared to the end of 2023, with the largest decline among the six major state-owned banks, indicating that its intensity of supporting the profit growth rate by adjusting provisions is higher than that of its peers.

In conclusion, after reaching the age of 18, the Postal Savings Bank of China stands at a crossroads in its development: with a larger scale, it faces more challenges; this is both a starting point and a turning point.

Looking to the future, whether the Postal Savings Bank of China can live up to what Chairman Zheng Guoyu said in the annual report speech: "The 18-year-old Postal Savings Bank of China has a promising future and great potential", remains to be seen.