Morgan Stanley-China Banks 2Q24 Wrap Earnings remained largely stable, bu...-110098773

Investment Rating - The industry view is rated as Attractive [2]. Core Insights - Earnings for banks remained largely stable in 2Q24, with notable divergences among state-owned enterprises (SOE) banks, particularly with ABC and BOC showing positive revenue growth while ICBC and BoCom exhibited weaker trends [2][6]. - The net interest margin (NIM) remained stable on average, with a modest decline of 2 basis points in 2Q24, supported by lower deposit and funding costs [2][6]. - Fee income pressure persisted, with a double-digit decline reported across most banks, although investment gains helped offset some losses [2][8]. - There was a wider divergence in revenue growth, with Ningbo and Hangzhou banks leading with 7-9% year-on-year growth, while banks like PAB and ICBC experienced notable revenue declines [2][10]. Summary by Sections Earnings Performance - The average profit growth for covered banks improved to 4.9% year-on-year in 2Q24, up from 1.5% in 1Q24, driven by SPDB and CRCB's strong performance [4][6]. - ABC reported a profit rebound of 6.2% year-on-year, while BoCom's profit decreased by 5.2% [5][6]. Net Interest Margin (NIM) - NIM for banks showed a slight average decline of 2 basis points, with CITIC Bank experiencing a notable rebound due to rational loan pricing and deposit cost cuts [2][7]. - ICBC's NIM fell to 1.38%, the lowest among the big four banks, reflecting a significant decline from the previous year [7][16]. Fee Income - Fee income across the covered banks declined by an average of 12.6% year-on-year in 2Q24, with most SOE banks experiencing accelerated declines [8][17]. - Investment income helped stabilize non-interest income, which remained flat year-on-year despite the fee income pressure [8][17]. Revenue Growth - Revenue trends showed a decline of 1.2% year-on-year on average, with significant variations among banks; ABC and BOC achieved positive revenue growth while ICBC's revenue fell by 8.8% [10][12]. - Ningbo and Hangzhou banks reported revenue growth of 8.6% and 7.3% year-on-year, respectively, supported by stable NIM and balance sheet growth [10][12]. Cost Management and PPOP - The average cost-income ratio rose by 60 basis points year-on-year to 32.3%, with SOE banks experiencing a more significant increase [10][11]. - Ningbo reported the strongest PPOP growth at 11.7% year-on-year, while ICBC and BoCom faced sharper declines in PPOP due to weaker revenue [11][12].