Evergrande Group transferred its non-tradable domestic shares in Shengjing Bank to a local state-owned enterprise for a price of RMB9.993 billion. Shengjing Financial Holdings will become the largest shareholder of Shengjing Bank
Text | "Finance" reporter Chen Hongjie
Edit | Yuan Man
On the morning of September 29, 2021, Evergrande Group (03333. HK), Shengjing Bank (02066. HK) has issued announcements one after another. Evergrande Group transferred its non-tradable domestic shares in Shengjing Bank to a local state-owned enterprise for a price of RMB9.993 billion. Shengjing Financial Holdings will become the largest shareholder of Shengjing Bank.
Undoubtedly, with the holding of state-owned assets, Shengjing Bank's risk control ability and operating conditions will be improved. However, Shengjing Bank will still face tests in the coming period, such as declining profitability, high non-performing rates, and the need to improve the provision coverage ratio.
According to the data, as of the first half of 2021, shengjing bank with total assets of more than one trillion yuan had a net profit of 1.046 billion yuan, a year-on-year decrease of 63.2%; the non-performing loan ratio was 3.04%, significantly higher than the average level of listed banks; and the provision coverage ratio was 130.93%.
United Credit believes that it is more important to note that Shengjing Bank's anonymous customers have a high degree of risk exposure and have broken through regulatory restrictions, which may become a new risk point for Shengjing Bank. According to the data, as of the end of 2020 and the end of 2019, the risk exposure of shengjing bank's largest single non-interbank single customer or anonymous customer was 91.143 billion yuan and 155.232 billion yuan, respectively.
How many more anonymous customers are in stock? How to mitigate risks? As of press time, Shengjing Bank would not comment.
The largest city in the northeast changed owners
On September 29, 2021, Evergrande Group announced that it would transfer its non-tradable domestic shares of Shengjing Bank of 1.753 billion yuan, accounting for 19.93% of the issued shares of Shengjing Bank, to the transferee, 5.7 yuan per share, totaling 9.993 billion yuan.
When talking about the reasons for the sale, Evergrande Group said that evergrande group's liquidity problems have caused a huge negative impact on Shengjing Bank, and the introduction of state-owned enterprise transferees as major shareholders will help stabilize the operation of Shengjing Bank, and at the same time help the appreciation and preservation of the 14.57% equity of Shengjing Bank still held by Evergrande Group. The delivery of the sale needs to be coordinated by Shengjing Bank, which requires that all proceeds from the sale be used to repay evergrande group's relevant debts to Shengjing Bank.
Also on the morning of September 29, 2021, Shengjing Bank also issued an announcement that it had recently received documents related to the transfer of shares between Shengjing Financial Holdings and Evergrande Nanchang. Shengjing Financial Holdings invested 9.993 billion yuan to acquire 1.753 billion domestic shares of Shengjing Bank held by Evergrande Nanchang. After the completion of the above-mentioned share transfer, Shengjing Financial Holdings will become the largest shareholder of Shengjing Bank.
According to public information, the transferee, Shengjing Financial Holdings, is a state-controlled enterprise engaged in industrial investment, capital management, asset management and other businesses, which is 58.33% owned by the State-owned Assets Supervision and Administration Commission of the Shenyang Municipal People's Government, 30.74% by the Shenyang Municipal Finance Bureau, 6.25% by the Shenyang Urban Construction Investment Group and 5.04% by the Department of Finance of Liaoning Province.
According to shengjing bank's 2021 semi-annual report, as of June 30, 2021, its total assets were 1,016.503 billion yuan, of which the total amount of loans and advances issued was 588.040 billion yuan, an increase of 40.978 billion yuan or 7.5% over the end of the previous year; the total liabilities were 935.416 billion yuan, of which the total amount of deposits absorbed was 728.963 billion yuan, an increase of 47.558 billion yuan over the end of the previous year, an increase of 7.0%.
The northeast region has always been an important town of city merchant houses, with a large number of city business houses. In terms of total assets, Shengjing Bank is the largest city commercial bank in northeast China, and ranks high among more than 130 city commercial banks in China, ranking in the top ten.
Net profit fell by another 63%
In the first half of 2021, the performance of listed banks improved. The overall net profit of 57 listed banks increased by 12.21% year-on-year to 1.02 trillion yuan, and the net profit of 52 banks increased year-on-year.
But Shengjing Bank is not. After a 77% year-on-year decline in net profit in 2020, shengjing bank's net profit in the first half of 2021 fell by another 63% year-on-year.
According to the data, in the first half of 2021, Shengjing Bank achieved a net profit of 1.046 billion yuan, a year-on-year decrease of 1.799 billion yuan, a decrease of 63.2%; achieved operating income of 8.508 billion yuan, a year-on-year decrease of 1.33 billion yuan, a decrease of 13.5%.
"It is mainly due to the policy background of releasing the loan market quotation rate (LPR) reform dividend and guiding the downward trend of social financing costs during the reporting period, which has benefited the real economy, resulting in a narrowing of net interest margins and a decline in net interest income; at the same time, under the continuous impact of the new crown epidemic, considering the uncertainty of business operations, based on the principle of prudence and prudence, the provision for asset impairment has been increased." Shengjing Bank said.
Further, in the first half of 2021, Shengjing Bank achieved net interest income of 6.631 billion yuan, a year-on-year decrease of 852 million yuan, a decrease of 11.4%, mainly due to the increase in its interest income by 339 million yuan and the interest expense by 1.191 billion yuan year-on-year.
Among the non-interest income, in the first half of 2021, Shengjing Bank achieved a net income of fees and commissions of 166 million yuan, a decrease of 415 million yuan or 71.4% year-on-year. In the first half of 2021, its net trading loss was 456 million yuan.
At the same time, in the first half of 2021, shengjing bank operating expenses were 2.491 billion yuan, an increase of 278 million yuan, an increase of 12.6%, and the cost-to-income ratio was 27.88%, up 6.47 percentage points year-on-year.
The sharp decline in Shengjing Bank's net profit in the first half of 2021 was partly due to an increase in the amount of asset impairment losses. "In the first half of the year, the Bank's asset impairment loss was 5.103 billion yuan, an increase of 730 million yuan or 16.7% year-on-year, mainly due to the principle of prudent operation, comprehensive consideration of the impact of uncertainty in the epidemic and economic environment on the operation of enterprises, and continued to increase the provision for asset impairment and further enhance the ability to compensate for risks." Shengjing Bank said.
In terms of non-performing ratio and provision coverage ratio, Shengjing Bank's performance is also not optimistic. As of June 30, 2021, Shengjing Bank had a non-performing loan ratio of 3.04%, a proportion of concerned assets accounted for 3.1%, and a provision coverage ratio of 130.93%.
Recently, PwC's "2021 Semi-annual Review and Outlook of China's Banking Industry" showed that as of the end of June 2021, the loan quality indicators of 57 listed banks were stable and improving, with the overall non-performing ratio falling from 1.51% at the end of 2020 to 1.44%, the overdue rate from 1.49% to 1.45%, and the concern loan ratio from 2.07% to 1.88%. The overall provision coverage ratio of listed banks was 223.66%.
Anonymous customer risk exposure is close to 100 billion yuan
Affected by the impenetrability of some investment assets such as monetary funds, the risk exposure of Shengjing Bank's largest single non-interbank single customer (anonymous customer) accounts for a high proportion of the net tier 1 capital, and at the same time, due to the impact of the transfer of some off-balance sheet assets back to the balance sheet, the proportion of the risk exposure of shengjing Bank's largest single non-interbank group or economically dependent customers in 2020 to the net tier 1 capital further increased compared with the end of the previous year, and it was also at a high level.
According to the data of Shengjing Bank, as of the end of 2020 and the end of 2019, the risk exposure/ net capital of the largest single non-interbank single customer or anonymous customer was as high as 115.08% and 198% respectively, and the risk exposure of the largest single non-interbank group or economically dependent customer/ the net capital of the first level also reached 32.18% and 22.47% respectively.
According to the 2020 and 2019 annual reports of Shengjing Bank, the net tier 1 capital of Shengjing Bank was 79.2 billion yuan and 78.4 billion yuan respectively. According to this calculation, at the end of 2020 and the end of 2019, the risk exposure of the largest single non-interbank single customer or anonymous customer was 91.143 billion yuan and 155.232 billion yuan, respectively. The risk exposure of the largest single non-interbank group or economically dependent customers also reached 25.487 billion yuan and 17.616 billion yuan respectively.
The 2020 and 2019 annual reports of Shengjing Bank also show that the loan amount of Shengjing Bank to the top ten single borrowers totaled 78 billion yuan and 60.2 billion yuan, of which the balance of the first major customer loan was 8.5 billion yuan and 9.5 billion yuan, accounting for 1.55% and 2.08% of the total loans, respectively.
In addition, in terms of related party transactions, United Credit stated in the "Shengjing Bank 2021 Tracking rating report" in July 2021 that as of the end of 2020, Shengjing Bank had not issued unsecured loans to related parties, had not provided credit with its equity as pledge security, and had not provided guarantees for the financing activities of related parties. According to the information provided by Shengjing Bank, according to the consolidated table caliber, as of the end of 2020, the credit balance of the single largest related party of Shengjing Bank and the credit balance of all related parties accounted for 2.81% and 27.67% of the net capital respectively.
"Shengjing Bank's anonymous customers have a high degree of risk exposure, and the proportion of non-interbank group customers' risk exposure to Tier 1 capital is also at a high level, which has broken through regulatory restrictions, and it is necessary to continue to pay attention to its large risk concentration exposure and related risks." Joint Credit said.
Also at the end of July 2021, United Credit determined to downgrade the long-term credit rating of Shengjing Bank to AA+, and downgraded the credit rating of "17 Shengjing Bank Level II" to AA, and downgraded the credit rating of "16 Shengjing Bank 02", "18 Shengjing Bank 01", "18 Shengjing Bank 02" and "18 Shengjing Bank 03" to AA+.
"Shengjing Bank cleared some of the high-cost and unstable company deposits, optimized the deposit structure, resulting in a significant decline in the scale of the company's deposits, considering the continued economic downturn in the northeast region, the future expansion of the company's deposit business is facing certain pressure." The quality of credit assets has declined, and there is still some downward pressure in the future, and the level of provisions needs to be improved. Operating income growth is under pressure, and profitability is declining. Non-standard investment still has a certain scale, and the future credit risk and liquidity need to continue to be paid attention to. Non-standard investments such as shengjing bank trust plan still have a certain scale, and the future credit risk and liquidity management pressure need to continue to be paid attention to. United Credit said.
Why are customers who have been exposed to nearly 100 billion yuan of the above risks anonymous? In which industries are these customers located? What measures is Shengjing Bank taking to resolve it? At present, how much is the amount of stock risk exposure? As of press time, Shengjing Bank has not responded to the Caijing reporter.
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