• News
• 2024-10-08

Banking Industry Stabilizes with Slow Volume, Reduced Prices, and Narrowing Interest Rate Spreads

Against the backdrop of insufficient effective demand, the expansion of bank scale has slowed overall; although the interest spread stabilized in the first half of the year, there is still downward pressure on the interest rates of the asset side in the future. However, under the current policies that protect the interest spread of banks, as well as the optimization of real estate policies and the advancement of local debt, the marginal improvement in non-performing pressure in key areas is expected, and the probability of the industry's interest spread and performance sliding beyond expectations is relatively low.

On August 9th, the National Financial Regulatory Administration released the data on the main regulatory indicators of the banking industry for the second quarter of 2024. The data shows that by the end of the second quarter of 2024, the total assets of China's banking industry continued to grow, and the overall quality of commercial banks' credit assets remained stable.

By the end of the second quarter, the total assets of China's banking financial institutions in local and foreign currencies amounted to 433.1 trillion yuan, a year-on-year increase of 6.6%; among them, the total assets of large commercial banks in local and foreign currencies amounted to 185.1 trillion yuan, a year-on-year increase of 7.9%, accounting for 42.7%; the total assets of joint-stock commercial banks in local and foreign currencies amounted to 72.1 trillion yuan, a year-on-year increase of 3.7%, accounting for 16.7%.

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By the end of the second quarter, the balance of loans (including loans to small and micro enterprises, loans to individual industrial and commercial households, and loans to small and micro enterprise owners) used by banking financial institutions for small and micro enterprises was 78 trillion yuan; among them, the balance of inclusive small and micro enterprise loans with a total credit limit of 10 million yuan or less per household was 32 trillion yuan, a year-on-year increase of 17.1%.

The overall quality of commercial banks' credit assets remained stable. By the end of the second quarter, the non-performing loan balance of commercial banks (legal person口径, the same below) was 3.3 trillion yuan, a decrease of 27.2 billion yuan from the end of the previous quarter; the non-performing loan ratio of commercial banks was 1.56%, a decrease of 0.03 percentage points from the end of the previous quarter. By the end of the second quarter, the normal loan balance of commercial banks was 210.8 trillion yuan; among them, the balance of normal loans was 206.1 trillion yuan, and the balance of watch list loans was 4.8 trillion yuan.

The overall risk compensation ability of commercial banks is sufficient. In the first half of the year, commercial banks achieved a cumulative net profit of 1.3 trillion yuan, a year-on-year increase of 0.4%; the average return on equity was 8.91%, a decrease of 0.65 percentage points from the end of the previous quarter; the average return on assets was 0.69%, a decrease of 0.05 percentage points from the end of the previous quarter.

By the end of the second quarter, the loan loss provision balance of commercial banks was 7 trillion yuan, an increase of 104 billion yuan from the end of the previous quarter; the provision coverage ratio was 209.32%, an increase of 4.78 percentage points from the end of the previous quarter; the loan provision ratio was 3.26%, basically the same as the end of the previous quarter.

By the end of the second quarter, the capital adequacy ratio of commercial banks (excluding foreign bank branches) was 15.53%, an increase of 0.1 percentage points from the end of the previous quarter; the tier 1 capital adequacy ratio was 12.38%, an increase of 0.04 percentage points from the end of the previous quarter; the core tier 1 capital adequacy ratio was 10.74%, a decrease of 0.02 percentage points from the end of the previous quarter.

The liquidity indicators of commercial banks remained stable. By the end of the second quarter, the liquidity coverage ratio of commercial banks was 150.7%, a decrease of 0.14 percentage points from the end of the previous quarter; the net stable funding ratio was 125.92%, an increase of 0.59 percentage points from the end of the previous quarter; the liquidity ratio was 72.38%, an increase of 3.72 percentage points from the end of the previous quarter; the excess reserve ratio of RMB was 1.72%, an increase of 0.02 percentage points from the end of the previous quarter; the loan-to-deposit ratio (RMB domestic口径) was 80.59%, an increase of 1.78 percentage points from the end of the previous quarter.

Slowing expansion paceIn the first half of the year, the net profit of commercial banks increased by 0.4% year-on-year, with a slight decrease in growth rate quarter-on-quarter. In the first half of the year, commercial banks achieved a net profit of 1.2574 trillion yuan, a year-on-year increase of 0.4%, and the growth rate decreased by 0.3 percentage points quarter-on-quarter compared to the first quarter. The average return on equity (ROE) was 8.91%, and the average return on assets (ROA) was 0.69%. The slight quarter-on-quarter decline in the net profit growth rate of commercial banks in the first half of the year was mainly due to the drag from rural commercial banks.

Looking at the performance of net interest income and non-interest income, the growth rate of scale has slowed down, and the interest spread remained the same quarter-on-quarter, and the growth of net interest income for commercial banks continued to be under pressure. Under the dual pressures of insufficient effective demand in the real economy and regulatory guidance to optimize supply, the growth rate of bank asset scale has continued to slow down since 2024. As of the end of June, the total assets of commercial banks were 370 trillion yuan, a year-on-year increase of 7.28%, which was 3.68 percentage points and 1.86 percentage points slower than in 2023 and the first quarter of 2024, respectively. In the first half of 2024, the net interest spread of commercial banks remained the same as the first quarter at 1.54%.

In the second quarter, the fluctuation in the bond market increased, and the contribution of non-interest income from commercial banks decreased slightly quarter-on-quarter. Since the beginning of the year, the trend of bond interest rates has been downward, and the non-interest income related to financial market investments by commercial banks has achieved good growth, and the overall contribution of non-interest income has increased, providing certain support for revenue. However, since the second quarter, under the game between the central bank and the market, the fluctuation in the bond market has increased. In the first half of the year, the proportion of non-interest income from commercial banks was 24.31%, a slight decrease of 1.3 percentage points quarter-on-quarter.

The profit growth rate of state-owned large banks, joint-stock banks, and city commercial banks improved quarter-on-quarter, while the growth rate of rural commercial banks slowed down. Looking at the performance of various types of banks, the year-on-year growth rates of net profits for state-owned large banks, joint-stock banks, and city commercial banks were -2.9%, 1.4%, and 4.4%, respectively, which were 1.7 percentage points, 0.2 percentage points, and 0.3 percentage points higher than in the first quarter, respectively; the net profit of rural commercial banks increased by 5.9% year-on-year, and the growth rate decreased by 9.7 percentage points quarter-on-quarter.

In the first half of the year, the net profit of commercial banks increased by 0.4% year-on-year, a decrease of 0.3 percentage points compared to the first quarter, and the weakening of provision feedback and the slowdown in credit growth may be important reasons. In addition, the relative rigidity of the cost side may also have dragged on profits. In the first half of the year, the cost-income ratio of commercial banks was 30.7%, an increase of 1.8 percentage points compared to the first quarter.

Looking at different institutions, in the first half of the year, the year-on-year changes in net profits for state-owned large banks, joint-stock banks, city commercial banks, and rural commercial banks were -2.9%, 1.4%, 4.4%, and 5.9%, respectively, which were 1.7 percentage points, 0.2 percentage points, 0.3 percentage points, and -9.7 percentage points different from the first quarter, respectively. Although the overall profit of the banking industry maintained positive growth, the performance of different types of banks was not the same. The negative growth of state-owned large banks narrowed, and the growth rate of rural commercial banks declined significantly.

The significant slowdown in the profit growth rate of rural commercial banks may be due to the increased provision for loan losses. As of the end of the first half of the year, the loan-to-provision ratio of commercial banks remained the same as at the end of the first quarter, while the loan-to-provision ratio of rural commercial banks increased by 6 basis points quarter-on-quarter. In terms of main profit indicators, in the first half of the year, the ROE and ROA of commercial banks were 8.9% and 0.7%, respectively, which were 0.7 percentage points and 0.1 percentage points lower than in the first quarter.

The expansion of the banking industry slowed down, and the asset growth rate of state-owned large banks decreased significantly. In the first half of the year, the total assets of commercial banks increased by 7.3% year-on-year, a decrease of 1.9 percentage points compared to the first quarter. Looking at different institutions, the year-on-year growth rates of state-owned large banks, joint-stock banks, city commercial banks, and rural commercial banks were 7.9%, 3.7%, 9.4%, and 6.5%, respectively, which were 3.3 percentage points, 0.4 percentage points, 0.3 percentage points, and 0.7 percentage points lower than in the first quarter, respectively. State-owned large banks may have been more affected by the suspension of "manual interest supplementation," with relatively serious deposit outflows, and their scale expansion was suppressed. The asset growth rates of joint-stock banks and city commercial banks and rural commercial banks were relatively stable, but there was still certain pressure to expand the balance sheet under the environment of insufficient demand.

The net interest spread of the banking industry stopped the downward trend, and the net interest spread of joint-stock banks rebounded. In the second quarter, the net interest spread of commercial banks remained the same as in the first quarter at 1.54%. The improvement in the cost side of liabilities is an important reason for the stable net interest spread; in addition, the negative impact of loan repricing and the reduction of existing mortgage interest rates on the net interest spread was mainly at the beginning of the year, and these impacts weakened in the second quarter. Looking at different institutions, in the second quarter, the net interest spreads of state-owned large banks and joint-stock banks were 1.46% and 1.63%, respectively, which were 1 basis point and 1 basis point different from the first quarter, respectively. The net interest spreads of city commercial banks and rural commercial banks were 1.45% and 1.72%, respectively, which were basically the same as in the first quarter.

The net interest spread has temporarily stabilized.From the perspective of scale growth, in the second quarter, the expansion of commercial banks' balance sheets further slowed down, with different types of banks continuing to show divergence. In Q2, the growth rates of both credit and non-credit assets of commercial banks have slowed down. Under the weak economic recovery elasticity, insufficient effective credit demand, and regulatory guidance for commercial banks to weaken incremental growth, optimize the stock, and prevent the idling of funds, the pace of balance sheet expansion of commercial banks has continued to slow down since the second quarter. At the end of June, the total assets of commercial banks increased by 7.28% year-on-year, down 1.86 percentage points quarter-on-quarter; among them, loans increased by 8.8% year-on-year, and non-credit assets increased by 4.9% year-on-year, down 1.1 percentage points and 2.7 percentage points quarter-on-quarter, respectively.

State-owned large banks saw a significant quarter-on-quarter decrease in loan growth rates, but their absolute levels still led; the growth rate decline of joint-stock banks narrowed; high-quality regional small and medium-sized banks had growth rates higher than the industry average. At the end of June, loans of state-owned large banks, joint-stock banks, city commercial banks, and rural commercial banks increased by 10.5%, 4.6%, 9.3%, and 8% year-on-year, respectively; the growth rates slowed down by 1.4 percentage points, 0.5 percentage points, 1.1 percentage points, and 1.5 percentage points quarter-on-quarter, respectively.

In terms of absolute growth rates, state-owned large banks continue to play a leading role in maintaining relatively fast balance sheet expansion, with a significant quarter-on-quarter decrease in growth rates, mainly related to the rectification of "manual interest supplementation"; the credit growth rate of joint-stock banks narrowed slightly at a low level; it is expected that there will be a significant divergence within city commercial banks and rural commercial banks, with high-quality regional city commercial banks and rural commercial banks leading in growth rates (Hangzhou Bank, Qilu Galaxy, Nanjing Galaxy, Ruifeng Galaxy, and Sunan Commercial Bank, which have disclosed performance flash reports/interim reports, have loan growth rates of 16.5%, 15.3%, 13.5%, 8.9%, and 8.7% year-on-year, respectively, all higher than the average of their respective industries).

Looking forward to the full year of 2024, under the dual pressures of insufficient effective demand in the real economy and regulatory guidance to optimize supply, the growth rate of commercial banks' credit scale is expected to continue to slow down trend-wise. In terms of credit structure, it is expected that corporate lending will continue to outperform retail lending. Considering the slow repair of residents' income and expectations, and the real estate market has not yet stopped falling, retail credit demand in the second half of the year may continue to be weak, and housing loans may contract. On the corporate side, with the acceleration of the issuance of special treasury bonds and government bonds in the second half of the year, the demand for infrastructure supporting credit is expected to increase, and the addition of corporate loans may be better than in the first half of the year.

In addition, it is expected that the balance sheet expansion of state-owned large banks and regional banks will be better than the industry average. On the one hand, with the increase in infrastructure demand, the credit demand of state-owned large banks and high-quality regional banks may be better than the industry average; on the other hand, with the continuous advancement of local debt resolution, state-owned large banks and regional banks participate in debt-to-loan swaps, and credit demand is expected to increase marginally. The traditional advantage customer groups of joint-stock banks, real estate, and retail are slow to repair, but in recent years, the structure has been continuously adjusted, and it is expected that the scale growth rate is expected to bottom out and slightly rise.

In the first half of the year, the net interest margin of commercial banks was 1.54%, which was flat quarter-on-quarter. Looking at the performance of various types of banks, the net interest margin of state-owned large banks narrowed by 1BP quarter-on-quarter to 1.46%, while the net interest margins of joint-stock banks and rural commercial banks rose by 1BP quarter-on-quarter to 1.63% and 1.72%, respectively, and city commercial banks remained flat at 1.45% quarter-on-quarter. The judgment that the net interest margin has stabilized stage-wise is mainly due to the improvement of deposit costs, with positive factors on the liability side continuing to accumulate, mainly including the following three factors: First, as time deposits gradually mature and are renewed, the effect of the reduction in deposit挂牌 rates in the past two years is accelerating; second, in the second quarter, regulatory rectification of bank deposits "manual interest supplementation" promoted the improvement of deposit costs for some state-owned large banks; third, banks actively manage high-yield products such as notice deposits and large-denomination certificates of deposit.

Looking forward to the full year of 2024, the net interest margin of commercial banks is still under pressure, but it is expected that the decline will narrow under the condition of strengthened control over liability costs. Considering the current weak effective credit demand and the possibility of further policy support for stable growth, the interest rates on newly issued loans, especially mortgage loan interest rates, still face downward pressure; coupled with the low-level replacement of bond investment interest rates, the asset side yield for the full year is expected to continue to be under pressure. However, considering the regulatory layer's caring attitude towards bank interest margins, synchronized cuts in deposit and loan interest rates, and banks' continuous strengthening of liability cost control, the reduction in liability costs is expected to alleviate the downward pressure on interest margins. In terms of liability structure, the impact of deposit outflows and the trend of regularization and long-termization caused by the reduction in deposit interest rates needs further observation.

In terms of asset quality, the non-performing indicators of commercial banks are generally stable, and the provision coverage ratio has increased quarter-on-quarter. As of the end of June, the non-performing loan ratio of commercial banks was 1.56%, down 3BP quarter-on-quarter. The proportion of loans under special mention was 2.22%, up 4BP quarter-on-quarter, and the overall asset quality indicators were generally stable; among them, the non-performing loan ratios of state-owned large banks, city commercial banks, and rural commercial banks decreased by 1BP, 1BP, and 20BP quarter-on-quarter to 1.24%, 1.77%, and 3.14%, respectively, while the non-performing loan ratio of joint-stock banks remained unchanged at 1.25% quarter-on-quarter. It is judged that the current pressure on bank asset quality mainly comes from consumer loans and business loans on the retail side, as well as corporate real estate loans.

As of the end of June, the provision coverage ratio of commercial banks was 209.3%, the loan provision ratio was 3.24%, and the provision/total assets ratio was 1.89%, up 4.8 percentage points, 1BP, and 2BP quarter-on-quarter, respectively, with further solidification of provisions; among them, the provision coverage ratios of state-owned large banks, city commercial banks, and rural commercial banks increased by 2.59 percentage points, 1.11 percentage points, and 10.54 percentage points quarter-on-quarter to 253.8%, 192.35%, and 143.14%, respectively; the provision coverage ratio of joint-stock banks decreased by 1.45 percentage points quarter-on-quarter to 216.58%.

In terms of bank capital, the core tier 1 capital adequacy ratio of commercial banks slightly decreased quarter-on-quarter, while the capital adequacy ratio further increased. As of the end of June, the core tier 1 capital adequacy ratio and capital adequacy ratio of commercial banks were 10.74% and 15.53%, respectively, changing by -2BP and 10BP quarter-on-quarter, respectively. The increase in the capital adequacy ratio mainly benefited from the new capital rules and the decline in asset growth. At the end of June, the risk-weighted assets of commercial banks increased by 4.5% year-on-year, with a quarter-on-quarter decrease of 1.7 percentage points; and the growth rate was lower than the total asset growth rate. Looking at various types of banks, the capital adequacy ratio of state-owned large banks remained unchanged quarter-on-quarter at 18.31%, while the capital adequacy ratios of joint-stock banks, city commercial banks, and rural commercial banks increased by 8BP, 25BP, and 38BP quarter-on-quarter to 13.61%, 12.71%, and 13.08%, respectively.In the first half of the year, commercial banks maintained steady profitability, with credit allocation entering a stage of high-quality development. The scale growth is expected to slow down within the forecast, the net interest margin remained flat quarter-over-quarter, and asset quality indicators remained stable. Looking forward to the full year of 2024, against the backdrop of insufficient effective demand, the overall scale expansion of banks is expected to slow down; there is still downward pressure on the interest rates on the asset side, and the interest margin is still under pressure. However, considering the accelerated improvement in deposit costs, the expected decline in the interest margin for the full year is expected to narrow year-on-year; under the situation of reduced volume and lower prices, it is difficult to expect an improvement in bank performance growth in the short term. At present, under the policy of protecting bank interest margins and optimizing real estate policies and local debt progress, the pressure on non-performing assets in key areas has improved marginally, and the probability of the industry's interest margin and performance exceeding expectations to decline is low. It is expected that the revenue and net profit growth rates of listed banks for the full year will be close to zero year-on-year.

The supporting role of both assets and liabilities is highlighted.

According to the bank supervision data released by the Financial Regulatory Authority, the total assets and liabilities of commercial banks in the first half of the year grew by 7.3% and 7.1% year-on-year, respectively, with a quarter-on-quarter decrease of 1.8 percentage points and 2.1 percentage points, respectively, and the trend of slowing scale growth continued; in addition, the net interest margin of commercial banks in the second quarter was 1.54%, the same as in the first quarter, and the downward pressure on the interest margin has weakened marginally.

Both the asset and liability sides have played a supporting role in the stabilization of the interest margin, and the profit growth rate of state-owned large banks has improved. In the second quarter, the net profit of commercial banks increased by 0.4% year-on-year, a quarter-on-quarter decrease of 0.3 percentage points; among them, the net profit of state-owned large banks decreased by 2.9% year-on-year, a decrease of 1.7 percentage points compared to the first quarter, and the profit margin improved marginally; the growth rates of joint-stock banks and city commercial banks were 1.4% and 4.4%, respectively, with stable quarter-on-quarter changes; rural commercial banks increased by 5.9% year-on-year, a significant decrease of 9.7 percentage points compared to the first quarter, and combined with the analysis of provisions and non-performing assets, it can be seen that the decline in rural commercial bank profit growth is due to a large increase in provisions.

In addition, the proportion of non-interest income of commercial banks decreased by 1.3 percentage points quarter-on-quarter, reflecting that the income from fees and investment was under pressure in the second quarter. From the perspective of the interest margin, the net interest margin of commercial banks in the second quarter was 1.54%, the same as in the first quarter, and the interest margin has stabilized in stages, with the quarter-on-quarter changes of various types of banks also within 1BP. The stabilization of the interest margin is partly due to the regulatory halt to "manual interest supplementation," which has eased the high cost of bank liabilities, and partly due to the arrangement on the asset side, with banks increasing the allocation of high-yield loans and reducing the scale of low-yield loans (such as discounting), thereby improving the asset structure.

It is worth noting that the scale growth of state-owned large banks is under marginal pressure, and joint-stock banks may face periodic pressure to reduce their balance sheets. In the second quarter, the asset and liability growth rates of state-owned large banks decreased by 3.3 percentage points and 3.6 percentage points quarter-on-quarter, respectively, the largest decrease among all types of banks, while the growth rates of other types of banks changed relatively smoothly; in terms of absolute levels, the growth rates of assets and liabilities of joint-stock banks were both below 4%, the lowest among all types of banks, highlighting the pressure on joint-stock banks to expand their balance sheets in a low-interest rate and insufficient demand environment.

Combining loan data, in the second quarter, the loan growth rate of state-owned large banks was 10.5%, a quarter-on-quarter decrease of 1.4 percentage points, less than the asset reduction, and it is speculated that the timing behavior of financial investment transactions and interbank lending at the end of the quarter affected the growth of non-loan assets. In addition, in the central bank's credit balance sheet, the deposit growth of state-owned large banks is also under pressure. In the second quarter, the deposit growth rate of national large banks slowed down by 1.7 percentage points quarter-on-quarter, leading to an expansion of the deposit-loan growth rate gap of state-owned large banks, a quarter-on-quarter decrease of 1.3 percentage points; while the deposit growth rate of small and medium banks increased by 0.3 percentage points quarter-on-quarter, driving the deposit-loan gap to rise by 0.9 percentage points quarter-on-quarter. The divergence in deposit growth is mainly due to the regulatory halt to "manual interest supplementation," which has curbed the high-interest deposit collection behavior of state-owned large banks, leading to a transfer of some deposits from state-owned large banks to small and medium banks.

In the second quarter, the non-performing loan ratio of commercial banks decreased by 3BP quarter-on-quarter to 1.56%, the non-performing loan amount decreased by 0.8% quarter-on-quarter, and the attention ratio increased slightly by 5BP to 2.22%. Among them, the non-performing loan ratio of rural commercial banks decreased by 20BP quarter-on-quarter to 3.14%, and the non-performing loan amount decreased by 5.2% quarter-on-quarter, with a significant improvement in asset quality indicators. However, from the perspective of provisions, the provision coverage ratio of rural commercial banks increased by 10.43 percentage points quarter-on-quarter to 143.14%, and the credit provision balance increased by 2.2% quarter-on-quarter, with a divergence between the growth of provisions and the decline in non-performing loans.

The reasons for this phenomenon may be as follows: First, in the second quarter, the loans of rural commercial banks increased by 8% year-on-year, and the natural growth of loans brought a positive contribution to the provision indicators due to the provision allocation; second, the decrease in non-performing loan amounts was mainly due to doubtful loans, with a slight increase in loss loans, possibly due to the migration of doubtful loans to loss loans, and at the same time, the write-off of original loss loans, hence the scale of loss loans increased slightly, the scale of non-performing loans decreased, but the total amount of provisions remained stable. However, when the loan risk classification migrates to the loss class, a provision must be allocated, and at the same time, the "Financial Asset Risk Classification Method" stipulates that loans with expected credit losses accounting for more than 90% of their book value are classified as loss loans, so when the original loss loans are written off, some loans need to be re-provisioned, forming a second provision. This process of two provisions increases the loan impairment loss for the current period, forming a negative contribution to net profit, which also corroborates the aforementioned significant slowdown in the profit growth of rural commercial banks. In other words, the improvement in the asset quality indicators of rural commercial banks may be due to the write-off of original loss loans.

The credit asset quality of the banking industry is stable, and the level of risk compensation is relatively sufficient. As of the end of the first half of the year, the non-performing loan ratio and attention ratio of commercial banks were 1.56% and 2.22%, respectively, changing by -3BP and 4BP compared to the first quarter, respectively; the provision coverage ratio and loan-to-provision ratio were 209% and 3.26%, respectively, increasing by 4.8 percentage points and remaining basically the same compared to the first quarter, respectively.Breaking down the figures by institution type, the improvement in asset quality is particularly evident among rural commercial banks. As of the end of the second quarter, the non-performing loan (NPL) ratios for state-owned large banks, joint-stock banks, city commercial banks, and rural commercial banks have changed by -1 basis point (BP), remained essentially flat, -1BP, and -20BP respectively compared to the first quarter. The provision coverage ratios for these banks have changed by 2.6 percentage points, -1.5 percentage points, 1.1 percentage points, and 10.4 percentage points respectively compared to the first quarter.

Amid the current environment of insufficient demand and declining interest rates, the banking industry has maintained a relatively stable profit growth rate in the first half of 2024, demonstrating a certain level of operational resilience. As the密集 disclosure period for listed banks' interim reports approaches, the performance prosperity of high-quality regional city commercial banks and rural commercial banks is expected to continue.

Specifically, there are two investment themes worth focusing on: First, under the trend of a declining interest rate center, the pressure of asset scarcity is expected to continue. There is a long-term positive outlook for the allocation value of high dividend-paying assets. Dividends are stable and sustainable; and against the backdrop of the expansion of passive funds and the guidance of medium to long-term capital into the market, there is strong support on the capital front. Second, in recent years, the valuations within the listed banking sector have fully converged, and the valuations of leading small and medium-sized banks do not have a significant premium over the sector. In the short term, it is recommended to pay attention to the valuation repair opportunities of banks with certain performance: in a low-interest-rate environment, banks with stable profits and high dividends highlight investment value; if subsequent economic expectations improve, high-quality regional banks may enjoy better performance elasticity.