In the context of intensified differentiation, issues such as scale contraction, slowing business growth, and capital adequacy pressure remain unresolved for some private banks.

Since the pilot program started at the end of 2014, the first batch of private banks, represented by Shenzhen Qianhai WeBank (hereinafter referred to as "WeBank") and Zhejiang Wangshang Bank (hereinafter referred to as "Wangshang Bank"), and three other banks, have been through nearly a decade.

As of now, there are a total of 19 private banks in China.

Except for Jiangxi Yumin Bank (hereinafter referred to as "Yumin Bank"), the other 18 private banks have all disclosed their operational data for 2023.

The customer service of Yumin Bank stated to Caijing Magazine that after the internal audit process of the bank's annual report is completed, the disclosure will be made in accordance with laws and regulations.

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Over the past year, the banking industry as a whole has faced a series of challenges such as changes in the macro environment and narrowing interest margins.

However, private banks have generally achieved certain growth in scale and performance, and the net interest margin has widened against the trend.

Nevertheless, in the context of intensified differentiation, issues such as scale contraction, slowing business growth, and capital adequacy pressure remain unresolved for some private banks.

As the "first decade" is about to come to an end, are private banks ready to embrace the "second decade"?

In 2023, the overall asset scale of private banks continued to grow, with the number of private banks with assets exceeding 100 billion yuan increasing to five, while two private banks experienced a decline in asset scale.

The annual report shows that by the end of 2023, the total assets of the 18 private banks reached 1.94 trillion yuan, an increase of about 182.5 billion yuan from the end of 2022 (excluding Yumin Bank, which has not disclosed its annual report).

Looking at the data changes of individual banks, due to different endowment advantages and other factors, the polarization between the top and bottom private banks has become increasingly apparent.

WeBank and Wangshang Bank, which have always occupied the top two positions, have long supported the "half of the mountain" of the total assets of the 19 private banks in recent years.

In 2023, WeBank's asset scale broke through the 500 billion yuan mark, increasing by 13.02% year-on-year to 535.579 billion yuan, ranking first; Wangshang Bank's asset scale increased by 2.5% year-on-year to 452.13 billion yuan, and the gap between the two has further widened compared to 2022.

The "third place" was won by Jiangsu Sushang Bank (formerly known as "Suning Bank", hereinafter referred to as "Sushang Bank"), although there is a significant gap compared to the "champion and runner-up", the bank's asset scale increased by 11.85% year-on-year to 116.649 billion yuan in 2023, replacing Wuhan Zhongbang Bank (hereinafter referred to as "Zhongbang Bank", asset scale of 114.484 billion yuan) in the third place in 2022.

It is worth mentioning that the "trillion team" also welcomed a new member - Sichuan Xinwang Bank (hereinafter referred to as "Xinwang Bank"), which entered the top five with an asset scale of 102.934 billion yuan, an increase of 21.36% year-on-year.

Private banks below the trillion scale have also changed their positions.

Tianjin Jincheng Bank (hereinafter referred to as "Jincheng Bank") surpassed Hunan Sanxiang Bank (hereinafter referred to as "Sanxiang Bank") and Beijing Zhongguancun Bank (hereinafter referred to as "Zhongguancun Bank") with an asset scale of 73.467 billion yuan, ranking sixth.

Weihai Lanhai Bank (hereinafter referred to as "Lanhai Bank") surpassed the "shrinking" Jilin Yilian Bank (hereinafter referred to as "Yilian Bank") with a total asset of 52.768 billion yuan, entering the top ten.

In addition, except for Yumin Bank, which has not yet disclosed its financial report, Zhenxing Bank and Xin'an Bank have an asset scale of less than 30 billion yuan.

Among them, Xin'an Bank, which started business in 2017, has seen its asset scale drop below 20 billion yuan to 19.291 billion yuan, a year-on-year decrease of 8.37%, ranking at the bottom of the 18 private banks that have disclosed data.

The law of "the strong get stronger" is not only reflected in the asset scale, but also the polarization trend of performance among private banks has intensified.

Among them, the gap between WeBank and other banks is obvious.

Source: Caijing According to the annual report information of private banks, in terms of revenue, the 18 private banks achieved a total revenue of about 91.2 billion yuan in 2023, a year-on-year increase of 16%.

Among them, WeBank ranked first with 39.361 billion yuan, a year-on-year increase of 11.30%; Wangshang Bank was 18.743 billion yuan, a year-on-year increase of 19.49%; Xinwang Bank, which broke through the trillion asset scale this year, saw its revenue increase by 50.60% year-on-year to 5.489 billion yuan, ranking third.

In terms of net profit, the 18 private banks achieved a total of about 21.252 billion yuan in 2023, a year-on-year increase of 21%.

Among them, WeBank's net profit increased by 21.01% year-on-year to 10.815 billion yuan, accounting for half of the total net profit of the 18 private banks.

The second place Wangshang Bank achieved a net profit of about 4.203 billion yuan, a year-on-year increase of 18.80%; the third place was Sushang Bank, with a net profit increase of 4.56% year-on-year to 1.051 billion yuan.

Compared with 2022, most private banks in 2023 recorded "double increase" in revenue and net profit.

In terms of revenue, seven banks had a year-on-year growth rate of more than 20%, among which two had a growth rate of more than 50%; in terms of net profit, ten banks had a year-on-year growth rate of more than 20%, among which two had a growth rate of more than 100%.

Among them, Hua Rui Bank achieved a turnaround from loss to profit, with its revenue increasing by 50.76% year-on-year to 14.63% in 2023; the net profit turned from a loss of about 341 million yuan to a net profit of 53 million yuan.

In addition, two private banks "increased profits but not revenue".

Among them, Zhenxing Bank achieved a net profit of 107 million yuan, a year-on-year increase of 3.34%; the revenue decreased by 10.92% year-on-year to 745 million yuan.

Yilian Bank achieved a net profit of 140 million yuan, a year-on-year increase of about 45.83%; the revenue decreased by 1.66% year-on-year to 1.065 billion yuan.

At the same time, Zhongguancun Bank, Jincheng Bank, Sanxiang Bank, and Xin'an Bank "increased revenue but not profits".

The bank with the largest year-on-year decline in net profit was Xin'an Bank, which, as the bank with the smallest asset scale among the 18 private banks, achieved a net profit of 44 million yuan in 2023, a year-on-year decline of 71.76%; the revenue was 326 million yuan, a year-on-year increase of 0.47%.

It is worth mentioning that in 2023, Xin'an Bank replaced the "business income" in the 2022 annual report with the "operating net income" in the annual report, and in the 2022 annual report of Xin'an Bank, the "business income" was 889 million yuan.

Xin'an Bank stated in the annual report that "affected by the economic downturn, the asset-liability side showed a downward trend, the overdue loan rate and non-performing loan rate showed an upward trend, and there was a certain operating pressure."

Against this background, Xin'an Bank's credit impairment loss increased significantly in 2023, rising by 169.57% from 709.1 million yuan in the previous year to 1.91 billion yuan.

Another bank with a larger decline in net profit is Zhongguancun Bank, which saw a year-on-year decline of 30.02% in net profit to 310 million yuan in 2023.

The bank's credit impairment loss also increased significantly in the past year, with the annual report showing that the credit impairment loss of Zhongguancun Bank increased by 86.49% year-on-year to 994 million yuan in 2023.

Due to different customer positioning, the average interest margin level of private banks has long been higher than that of traditional commercial banks.

Against the background of the overall narrowing of the net interest margin in the banking industry, private banks still maintained an upward trend last year.

According to data released by the National Financial Regulatory Administration (hereinafter referred to as the "Financial Regulatory Administration"), by the end of the fourth quarter of 2023, the net interest margin of private banks was 4.39%, an increase of 0.18 percentage points from the third quarter of last year.

At the same time, the net interest margins of large commercial banks, joint-stock banks, and city commercial banks were 1.62%, 1.76%, and 1.57%, respectively, all of which showed a decline on a quarter-on-quarter basis.

Looking at the data as of the end of 2023, the highest net interest margin was Sushang Bank, at 4.41%, which was 0.34 percentage points lower than the previous year.

Following that were Lanhai Bank and Zhongguancun Bank, with net interest margins of 4.34% and 4.33%, respectively, both of which increased compared to 2022.

Looking at other points last year, some private banks achieved even higher net interest margins.

For example, Wuxi Xishang Bank (hereinafter referred to as "Xishang Bank") had a net interest margin of 6.21% as of September 2023; WeBank was 6% (as of June 2023); Xinwang Bank was 5.2% (as of September 2023).

Some banking industry insiders pointed out that compared with traditional commercial banks, the customer base of private banks is mainly long-tail small and micro customers, and the loan interest rate level is generally higher.

"The net interest margin of private banks is closely related to their business choices.

In order to achieve differentiated competition, private banks need to find customers that traditional commercial banks cannot cover, such as the sinking market, which increases the bargaining space."

However, among the 10 private banks that disclosed the net interest margin data as of the end of 2023, nine were below the average net interest margin of private banks (4.39%).

At the same time, private banks are not without pressure to narrow the interest margin.

Among the above 10 private banks, four private banks saw a decline in net interest margin.

Among them, Xin'an Bank's net interest margin fell below 2% (1.92%).

Zeng Gang, director of the Shanghai Finance and Development Laboratory, previously pointed out in an interview with Caijing that the net interest margin of private banks seems very high, but the hidden costs behind it are not low.

"For the entire banking industry, narrowing the interest margin is an inevitable trend.

If it relies purely on pure loan business within the table, it may be difficult to become the mainstream trend for future development."

"We are reducing interest rates every year, and now the span is relatively large, which is also related to market competition.

For some high-risk customer groups, the pricing will be higher when testing, but when the customer group matures, we will gradually lower it."

A senior executive of a private bank revealed that under the background of regulatory emphasis on giving benefits, the asset pricing of private banks has declined.The situation has undergone changes.

According to data recently released by the Financial Regulatory Administration, in the first quarter of this year, commercial banks' net interest margin once again reached a new low, falling by 15 basis points from the fourth quarter of 2023 to 1.54%.

Private banks were not immune, with their net interest margin dropping from 4.39% in the fourth quarter of last year to 4.32%.

However, compared to other types of commercial banks, this figure remains at a relatively high level.

In addition to the net interest margin, changes in the scale of deposits and loans of private banks are also of concern to the market.

Looking back at history, private banks have experienced a phase of rapid business expansion.

However, since 2021, influenced by the tightening of internet deposit and loan businesses and other factors, the growth rate of the scale of deposits and loans at private banks has slowed down in recent years, and "double-digit growth rates" have long become history.

In terms of loan scale, by the end of 2023, among the 18 private banks, six had a year-on-year increase of more than 20%.

Meizhou Ke Shang Bank (hereinafter referred to as "Ke Shang Bank") had the largest growth rate, increasing by 51.90% year-on-year to 21.101 billion yuan.

However, the growth rate of five private banks was below 10%.

Among them, Yi Lian Bank became the only bank with a negative growth in loan scale, falling by 10.30% year-on-year from 37.459 billion yuan in 2022 to 33.602 billion yuan.

It is worth noting that compared to large and medium-sized banks, private banks serve a relatively lower-end customer base.

However, with the acceleration of the layout of the sinking market by state-owned large banks and local small and medium-sized banks in recent years, the competitive pressure on private banks has further increased.

At the same time, in April of this year, according to multiple media reports, the Financial Regulatory Administration issued the "Notice on Further Regulating the Internet Loan Business of Joint-Stock Banks, City Commercial Banks, and Three Types of Banks", which clearly requires joint-stock banks, city commercial banks, and private banks to prudently set the total scale and structural distribution of internet loan business indicators to avoid over-reliance on a single type of internet loan business or a single cooperative institution.

"After rapid growth, internet loans need to shift from pursuing scale to pursuing quality," a person in the industry pointed out that some private banks are overly dependent on cooperative institutions for customer acquisition and drainage, and overly pursue short-term revenue growth, with risks behind it.

Compared to the loan side, half of the private banks face greater pressure to attract deposits.

According to statistics, among the 18 private banks, nine have a deposit scale growth rate lower than the loan balance.

Among the 18 private banks, five have a deposit scale growth rate of more than 20%.

The largest growth rate is Hua Tong Bank, which saw a year-on-year increase of 40.33% in its deposit scale to 25.242 billion yuan in 2023.

Four private banks have a deposit scale growth rate of less than 10%, with Xin'an Bank at the bottom, with a deposit scale increasing by 1.37% year-on-year to 12.69 billion yuan in 2022.

It is worth mentioning that private banks once attracted customer attention with deposit interest rates higher than those of traditional commercial banks.

However, against the background of interest rate declines, several private banks have followed suit in issuing announcements to reduce deposit interest rates.

In the view of many industry insiders, the strategy of "high interest rate deposit attraction" is unsustainable if the price on the asset side cannot rise.

However, judging from the recent sales activities of some private banks, the pressure to attract deposits still exists.

A customer service representative of a private bank in the Northeast region said that by purchasing a deposit product of the bank recently, you can get a subsidy interest rate of about 1.8%, and the comprehensive annualized rate can reach 3.5%.

In terms of asset quality, most private banks maintained a relatively stable level last year.

Data released by the Financial Regulatory Administration shows that by the end of the fourth quarter of 2023, the non-performing loan ratio of private banks was 1.55%.

This level is higher than that of state-owned large banks and joint-stock banks (both 1.26%), and lower than that of city and rural commercial banks (1.75% and 3.34% respectively).

Specifically, except for the online merchant bank with a statistical caliber of overdue for more than 30 days (non-performing loan ratio of 2.28%, if calculated according to the overdue for 60 days caliber, it is 1.87%), the non-performing loan ratio of the remaining 17 private banks did not exceed 2%.

Compared with 2022, among the 18 private banks, seven private banks saw a decline in the non-performing loan ratio, two remained unchanged, and the remaining half of the private banks saw an increase in the non-performing loan ratio.

Among them, the online merchant bank, Zhongbang Bank, and Sanxiang Bank ranked at the forefront with a non-performing rate above 1.7%.

The non-performing loan ratio of the online merchant bank overdue for 30 days increased by 0.34 percentage points from the beginning of the year; Zhongbang Bank and Sanxiang Bank increased by 0.26 percentage points and 0.22 percentage points respectively.

At the same time, the average non-performing loan ratio of private banks has also increased this year.

According to data from the Financial Regulatory Administration, by the end of the first quarter of this year, the non-performing loan ratio of private banks was 1.72%, an increase of 0.17 percentage points from the fourth quarter of 2023.

"Under the background of overall environmental pressure, the pressure on small and micro enterprises will also be relatively greater," Liang Huan, Deputy General Manager of the Science and Innovation Finance Department of WeBank, told "Finance and Economics" that compared to large enterprises, serving small and micro enterprises poses higher requirements for risk control capabilities, and WeBank's digital risk control is a more core capability.

It is reported that WeBank has built a two-dimensional full-process digital risk control system centered on enterprises and business owners.

It combines the personal credit data of business owners with the business operation data, and in the pre-loan credit assessment system, there are both credit assessment dimensions based on the personal credit of business owners and third-party data with public credibility that can be used to assess the credit repayment ability of enterprises.

Guo Hong, Chairman of Zhongguancun Bank, mentioned in his annual report speech that in 2023, the bank continued to enrich collection methods, and through pre-litigation preservation, mediation execution, local and non-local litigation, entrusted collection, and asset transfer, the bank's non-performing loan repayment exceeded 80 million yuan throughout the year.

To prevent the risk of non-performing assets, the provision coverage ratio can be regarded as the "safety cushion" of banks.

Among the 17 private banks that disclosed data, eight increased the provision coverage ratio.

Among them, the increase of Xi Shang Bank was the largest, increasing by 109.99 percentage points from the previous year to 419.91%, ranking first in the provision coverage ratio of private banks.

At the same time, some banks have undergone significant adjustments.

Among the 17 private banks that disclosed data, nine have declined.

The largest decline was Wenzhou Minshang Bank, which fell from 749.59% in 2022 to 290.93% in 2023.

Ke Shang Bank also saw a significant decline, with the provision coverage ratio falling by 241.80 percentage points to 302.46% in 2023.

In addition to focusing on asset quality, the capital adequacy ratio is also a reflection of a bank's risk resistance.

The data disclosed by the National Financial Regulatory Administration shows that by the end of 2023, the capital adequacy ratio of commercial banks was 15.06%, while that of private banks was 12.32%, significantly lower than the former.

Looking at last year's data, among the 18 private banks, most private banks' capital adequacy ratios were in the 10%-13% range, more than half were lower than the average level of private banks, and the capital adequacy ratios of 12 private banks declined to varying degrees.

Xin'an Bank had the highest capital adequacy ratio, at 23.87%, but declined by 0.42 percentage points from last year.

The lowest capital adequacy ratio was Zhongbang Bank, at 10.67%, which also declined.

It is worth mentioning that the "Commercial Bank Capital Management Measures" implemented in January 2024 stipulate that the capital adequacy ratio of commercial banks must not be lower than 8%.

Compared to other commercial banks, private banks have a narrower channel for capital replenishment.

Although some private banks are supported by powerful shareholders, they are subject to the requirement that the shareholding ratio of a single shareholder must not exceed 30%, and private banks are under pressure to replenish capital.

During the "two sessions" this year, Wang Junjin, Chairman of Shanghai Junlian (Group) Co., Ltd., one of the shareholders of Hua Rui Bank, suggested in his proposal to further support private banks in replenishing capital through multiple channels.

Under the premise of controllable risks, it is suggested that regulatory authorities adjust and optimize the access standards for private bank shareholders, and explore a shareholding structure dominated by private capital, diversified, market-oriented, and professional capital cooperation participation, while maintaining private control, to further optimize corporate governance.

On June 6, the Party Branch of the Joint-Stock City Commercial Bank Department of the Financial Regulatory Administration mentioned in the article "Striving to Write a New Chapter in the Regulatory Work of Joint-Stock Banks, City Commercial Banks, and Private Banks" that it focuses on the impact of the decline in bank net interest margins on the ability to replenish capital internally and carries out in-depth research, actively studies feasible measures to replenish capital, and enhances the ability of capital to offset risks.