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Bank card fee cut has limited impact on bank profits
By Ma Ning and Cheng Bowei |
November 30, 2012, Friday
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Print Edition
Print Edition
PEOPLE'S Bank Of China has issued new guidelines on bank card Point Of Ssale transaction fee rates which have been unchanged since 2003. The new rates, effective from February 2013, will lower such fee for most merchants and organizations.
For restaurants and hotels, the fee rate is cut from 1.4 percent to 0.9 percent. For wholesalers, general merchants and travel agencies, the new rate is 0.55 percent compared with 0.7 percent.
For supermarkets, transport and petrol, the new rate is down to 0.26 percent from 0.35 percent. For public hospitals or schools, the zero charge policy is unchanged.
We believe the fee rate cut would have only a limited impact on bank profits. The market rates of bank card fees are already based on negotiation and are lower than the above-mentioned rates.
For instance, we estimate the average fee rates for China Construction Bank debit cards, Industrial and Commercial Bank of China bankcards, and China Merchants Bank credit cards are respectively 0.48 percent, 0.59 percent and 0.83 percent, all below or close to new official fee rates.
Potential impact
We believe the potential impact for bank card fees may be on restaurants and hotels, whose rates would be trimmed to 0.9 percent transaction volume from a 1 percent to 1.4 percent range.
We estimate the negative impact on pro-forma pre-tax profit would be on average 0.4 percent based on the first half of 2012 profits, assuming that around 25 percent of the total bank card fee income related to hotel, restaurants and jewelry would be affected by a 30 percent cut and that bankcard fee income related to other types is unchanged.
Within China banks, Bank of Communications, China Minsheng Bank, Ping An Bank and China Everbright Bank would be relatively more affected than peers.
We believe the credit fee rate cuts are less influential than those in the previously reported version, and would have a limited negative impact.
We retain our constructive view on China banks on cyclical macro stabilization and recovery.
Ma Ning and Cheng Bowei are analysts of Beijing Gao Hua Securities Co, a partner of Goldman Sachs. The opinions are their own.
For restaurants and hotels, the fee rate is cut from 1.4 percent to 0.9 percent. For wholesalers, general merchants and travel agencies, the new rate is 0.55 percent compared with 0.7 percent.
For supermarkets, transport and petrol, the new rate is down to 0.26 percent from 0.35 percent. For public hospitals or schools, the zero charge policy is unchanged.
We believe the fee rate cut would have only a limited impact on bank profits. The market rates of bank card fees are already based on negotiation and are lower than the above-mentioned rates.
For instance, we estimate the average fee rates for China Construction Bank debit cards, Industrial and Commercial Bank of China bankcards, and China Merchants Bank credit cards are respectively 0.48 percent, 0.59 percent and 0.83 percent, all below or close to new official fee rates.
Potential impact
We believe the potential impact for bank card fees may be on restaurants and hotels, whose rates would be trimmed to 0.9 percent transaction volume from a 1 percent to 1.4 percent range.
We estimate the negative impact on pro-forma pre-tax profit would be on average 0.4 percent based on the first half of 2012 profits, assuming that around 25 percent of the total bank card fee income related to hotel, restaurants and jewelry would be affected by a 30 percent cut and that bankcard fee income related to other types is unchanged.
Within China banks, Bank of Communications, China Minsheng Bank, Ping An Bank and China Everbright Bank would be relatively more affected than peers.
We believe the credit fee rate cuts are less influential than those in the previously reported version, and would have a limited negative impact.
We retain our constructive view on China banks on cyclical macro stabilization and recovery.
Ma Ning and Cheng Bowei are analysts of Beijing Gao Hua Securities Co, a partner of Goldman Sachs. The opinions are their own.
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