Analyst Pin-board Banking industry: Service income growth has been temporarily hampered, yet the long-term potential remains intact
Covid-19 pandemic has led to a slowdown, even compression, of banks’ service income in 1H2020.
During 1H2020, many listed banks witnessed weak performance of service income growth, which stayed at only 9.9% YoY (much lower than 42.1% in 1H2019). Service income contributed to 10.6% of operating income (similar to 1H2019). The main reasons for the slowdown include (1) weak credit demand, which had hampered banking services, particularly insurance, trade service and FX gains, (2) net payment fee slowdown upon tariff discount, and (3) the decline in customer traffic over counters. Another contributor to this short-term trend could be the transfer in booking of some credit card fees (from fee income to interest income) in some banks since the beginning of this year.
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