The first semi-annual report of a major state-owned bank is released.

On the evening of August 28, Bank of Communications (601328.SH; 03328.HK) announced its performance report for the first half of 2020. This is also the first report released by Bank of Communications’ new chairman and president after taking office. Semi-annual report card.

Financial report data shows that the bank achieved net operating income of 126.959 billion yuan in the first half of the year, a year-on-year increase of 7.31%. Among them, net interest income and net fee and commission income increased by 5.41% and 5.00% respectively year-on-year. Net profit attributable to parent companies was 36.505 billion yuan, a year-on-year decrease of 14.61%.

Why did the company experience negative profit growth for the first time since its listing, and the decline was so large? Guo Mang, vice president of the Bank of Communications, said that this is the result of the superposition of multiple factors such as the impact of the epidemic, banks’ active profit concessions, and increased provisions.

In terms of real profit transfer, Bank of Communications has provided a total of approximately 14 billion yuan in profit to the real economy in the first half of the year by lowering loan interest rates, reducing or exempting customer fees, and deferring principal and interest payments. It has adopted measures for 170 billion yuan in loan amounts. In addition to deferred principal repayment with compound interest and proactively lowered loan interest rates, the loan interest rates for group customers dropped by 31 basis points year-on-year.

The epidemic has had a relatively obvious impact on the asset quality of banks. As of the end of June, Bank of Communications' non-performing loan balance and non-performing loan ratio increased by 23.38 and 0.21 percentage points respectively from the end of 2019; the provision coverage rate was 148.735%, a decrease of 23.04 percentage points from the end of the previous year.

Specifically, as of the end of June, the non-performing loan rate of Bank of Communications was 2.04%, an increase of 0.26% from the end of 2019; the non-performing loan rate of personal loans was 1.17%, an increase of 0.11 percentage points from the end of the previous year, of which the credit card non-performing rate was further increased to 2.90%.

In addition, Bank of Communications' credit impairment losses also increased significantly. Financial report data shows that in the first half of the year, credit impairment losses were 33.333 billion yuan, an increase of 11.789 billion yuan year-on-year, with a growth rate of 54.72%. Among them, loan credit impairment losses were 31.134 billion yuan, an increase of 9.049 billion yuan year-on-year, with a growth rate of 40.97%. .

According to Zhang Hui, chief risk officer of the Bank of Communications, the impact of the epidemic on the Bank is reflected in consumer loans represented by credit cards, which were the first to be exposed. In the first half of the year, credit card business accounted for about 26% of Bank of Communications' new non-performing loans. With the further optimization of the new card issuance policy and strategic model, card business non-performing loans began to decline in June. It is expected that new credit card non-performing loans will fall in the second half of the year. to the previous level.

Zhang Hui also said that more than 50% of the increased provision expenditures in the first half of the year were due to the impact of the epidemic. At the same time, Bank of Communications adjusted and optimized the transition model in a timely manner based on the impact of the epidemic on macroeconomic indicators. Provisions for loans implemented due to the impact of the epidemic are sufficient.

Financial report data shows that as of the end of June, Bank of Communications' provision balance was 143.217 billion yuan, an increase of 9.164 billion yuan from the beginning of the year, and provision expenditure was 33.5 billion yuan, a year-on-year increase of 55.4%.

Zhang Hui said that more than 50% of the bank's provision expenditures in the first half of the year were to cope with the impact of the epidemic, and the provisions for bailout loans were sufficient. The next step will be to continue to implement the requirements of the central government and regulatory authorities. , ensuring stable asset quality.

With net profits declining and NPLs rising, Bank of Communications, under heavy pressure, is further accelerating its digital transformation.

On August 25, Bank of Communications announced that its technology subsidiary Bank of Communications Jinke was registered and established in the Lingang New Area of ??the China (Shanghai) Pilot Free Trade Zone. BoCom Jinke has a registered capital of RMB 600 million. In the future, it will focus on the three main businesses of "high-end infrastructure research and development and talent supply, business application research and development of group subsidiaries, and third-party customer services and product output" to accelerate product research and development and create technological value. , empowering financial business development.