(Yicai) March 28 -- Revenue at China Merchants Bank fell last year for the first time since 2009 following cuts in the country’s benchmark lending rate and other factors, while the lender's president expects its first-quarter performance to remain under pressure.

Revenue dipped 1.6 percent to CNY339.1 billion (USD46.9 billion) in the 12 months ended Dec. 31 from a year earlier, the Shenzhen-based bank said in an annual financial report released late on March 25. Net profit rose 6.2 percent to CNY146.6 billion.

The People’s Bank of China pared the country’s loan prime rate, which is used as a reference rate for mortgages and other lending, last year to support the housing market and the wider economy. A lower LPR can squeeze net interest margin, or the difference between what a bank earns in interest on loans and the amount it pays in interest on deposits.

At CMB, net interest income fell 11.6 percent in 2023, with net interest spread and net interest margin shrinking 25 basis points.

LPR cuts, existing mortgage loan repricing, and lower insurance and fund distribution commission rates since last year will have strong effects this quarter, CMB President Wang Liang said on the bank’s earnings conference call yesterday. The five-year LPR was cut again last month, resulting in more operating pressure for the bank, he added.

Insufficient credit demand and excessive supply of funds has led to a loan price distortion, Wang said, noting that “for some clients their loan rate is even lower than the deposit rate provided for them and it's not sustainable.”

CMB targets loan growth of between 8 percent and 9 percent this year, he said.

The capital market slump and lower fund and insurance commission rates meant CMB’s wealth management and non-interest income remained under pressure. The bank's non-interest income fell 1.7 percent last year, with net service fee and commission income tumbling 10.8 percent. Wealth management revenue dropped 7.9 percent to CNY45.3 billion (USD6.3 billion).

Positive factors have begun to appear, though operating pressures remain, according to CMB executives. The lender faces significant interest margin pressure this quarter, and the annual interest margin in 2024 could be the lowest compared with the next few years, said Vice President Peng Jiawen, who also noted that the pressure will ease gradually.

Positive factors in non-interest income and wealth management have continued to increase, Peng pointed out. The capital market will likely bottom out with the economic recovery, and there are structural opportunities in the bond and bill markets, which will help improve service fees and commissions, he added.

Shares of China Merchants Bank [SHA: 600036] fell 0.4 percent to close at CNY32.18 (USD4.45) in Shanghai today. So far this year, the stock has gained almost 16 percent.

Editor: Martin Kadiev