Pufa's "life-saving" straw
Author: Xu Feng, Editor: Xiao Shimei
Judging from the current situation, SPD Bank has reached the point where it has to change.
As the former "king of the public", SPD Bank has not had a good time in recent years, and the problem of performance growth momentum has begun to appear. In the first half of 2023, the company's operating income was 91.23 billion, a year-on-year decrease of 7.52%; The net profit was 23.138 billion, a year-on-year decrease of 23.32%, which is not only in the stock bank, but also in the bottom position among all A-share listed banks.
In September, Pudong Development announced major personnel changes, and both the chairman and president were replaced.
Can the new leadership be a lifesaver to turn things around?
【Slide, bottom】
In recent years, SPF's performance has not been satisfactory, and the fatigue of growth has gradually emerged.
From the perspective of operating income, Pudong Development began to decline after the growth rate rebounded to more than 10% in 2019, and fell into negative growth in 2021 and 2022, and the revenue level of 188.622 billion in 2022 was even lower than in 2019.
Looking at all joint-stock banks, the net profit growth rate of Pudong Development in recent years is even more "unbearable". Since 2015, it has fallen into a state of low growth, and from 2020 to 2022, it has been negative growth for three consecutive years, and has been at the bottom of the stock bank.
In the first half of 2023, the decline in SPD performance expanded again, with revenue falling by more than 10% in the second quarter alone, and net profit even falling by more than 30%, which was significantly lower than the -18.35% decline in the first quarter, and the growth rate hit a new low in ten years.
In addition, when the industry generally picked up in 2021, the performance of Shanghai Pudong Development Bank remained flat. According to PwC statistics, the overall net profit of listed banks in that year increased by 13.06% year-on-year, while Pudong Development had a growth rate of -9.12% and a significant gap with the industry.
The reason for the sluggish performance of SPD is related to the continuous decline in net interest margin. In 2018, the net interest margin of Shanghai Pudong Development Bank was still 1.94%, ranking 4th among stock banks, but in the first half of 2023, it fell to 1.56%, and the ranking also slipped to 8th.
The rapid decline in SPD net interest margin was mainly due to the pressure on both the return on assets and the interest cost ratio.
In terms of asset yield, the yield on interest-bearing assets of Pudong Development was 4.56% in 2019, which dropped to 3.88% in the first half of this year, and its ranking in the stock bank dropped from 4th to 7th. This was mainly affected by the repricing of mortgage prices and the slowdown in loan size.
SPD's interest payment costs are also not dominant. The comprehensive cost of debt in the first half of 2023 was 2.35%, which was higher than Ping An Bank's 2.25%, China Merchants Bank's 1.71%, and China CITIC Bank's 2.21%, etc., and there is still room for optimization.
The stall of SPD performance growth also shows a trend of falling behind. As early as 2010, Pudong Development was already the first echelon in the stock bank, with an asset scale of 2.2 trillion yuan, second only to CMB. Moreover, Pudong Development is known for its corporate business, and its business scale ranked first in the stock industry that year, and it had the title of "the king of public affairs".
In recent years, Pudong Development has been continuously overtaken in terms of revenue, not only the gap with CMB is getting bigger and bigger, but also has been surpassed by Industrial Bank and China CITIC Bank, and the gap with Ping An Bank is also narrowing. This is even more true of the scale of net profit, which even fell to the 7th place of the stock bank in the first half of the year.
While SPD's performance growth is under pressure, internal control issues also need to be paid attention to.
【Internal control issues cannot be ignored】
Pufa's internal control problems are first and foremost the huge number of complaints.
According to official statistics, in 2022, the number of complaints filed by Pufa was 18,800, accounting for 15.8% of the total number of complaints from the stock bank, and the number of complaints in the stock bank was the highest for two consecutive years.
Specifically, the complaints mainly involve credit cards, personal loans and other businesses, and credit cards are the hardest hit areas. In 2022, the bank's credit card business accounted for more than 80% of the total complaints.
There are also more types of issues involved in complaints. For example, some customers will inexplicably receive repayment information, open installment business and reserve funds privately, there is no SMS notification of bill repayment date, loan interest is high, and so on.
In addition to the complaints, SPD has also been involved in fraud, huge fines and the constant arrest of executives.
For example, as early as 2017, the 77.5 billion yuan fraud case of SPD Chengdu Branch, in order to cover up non-performing loans, Chengdu Branch illegally handled credit, interbank and other businesses, and granted 77.5 billion yuan of credit to nearly 1,500 shell enterprises, which also unveiled the illusion of the branch's long-term "zero bad" prosperity. The incident was eventually fined 460 million yuan by the Sichuan Regulatory Bureau.
On the issue of fallen executives, SPD's private banking department is the hardest hit by corruption. In the past three years, four people, including Li Pei, product manager of the product operation department, and Yang Zaibin, deputy general manager of the asset management department, have been investigated successively.
In addition, SPD is also a frequent customer on the list of fines by the regulatory authorities. In 2021 and 2022 alone, the fines exceeded 160 million. Among them, in July 2021, he was fined 69.2 million yuan at one time for 31 violations, including ineffective cooperation with on-site inspections, untimely revision of internal control systems, and failure to truly reflect business data to regulatory authorities.
A large number of non-performing loans are a microcosm of SPD's internal control problems.
Among the joint-stock banks, the amount of non-performing loans of Pudong Development ranked first, reaching 74.302 billion yuan in the first half of the year, much higher than CMB's 60.641 billion yuan and China CITIC Bank's 64.850 billion yuan. And in the key indicator of non-performing loan ratio, SPD is 1.49%, ranking third among stock banks.
Corresponding to the large number of non-performing loans of Pudong Development is the huge credit impairment loss that it has to accrue every year. In the first half of 2023, 38.438 billion yuan was accrued, which also ranked first in the stock bank, which caused a great erosion of net profit and was also an important reason for the continuous decline of net profit scale in the ranking of stock banks.
[Must be broken]
The decline in SPD performance is related to frequent changes in management and continuous adjustment of the company's strategy.
Since its establishment in 1992, there have been 6 presidents, and the real foundation for Pufa is Fu Jianhua, who took office in 2006.
During the period from 2006 to 2011, during his tenure, SPD's revenue and asset scale were growing rapidly, its operating indicators were constantly improving, and its ability to resist risks was continuously improved.
During the period, the total assets of Pudong Development increased from 0.69 trillion yuan to 2.69 trillion yuan, an increase of nearly three times. The non-performing loan ratio dropped from 1.83% to 0.44%, while the provision coverage ratio increased rapidly from 151.46% to nearly 500%, ranking first among joint-stock banks.
In 2015, when Liu Xinyi took over the helm, the business wind changed significantly. In the new five-year plan, he put forward the development goal of "three big three" and put the expansion of retail at the top of the "big three".
Since then, the retail scale of Pudong Development has grown by leaps and bounds. From 0.97 trillion yuan in 2016 to 1.68 trillion yuan in 2019, the scale increased by more than 70%, and the proportion of total loans increased from 35.12% to 42.18%, and the retail loan interest income in that year was 97.785 billion yuan, surpassing the company's loan interest income for the first time and becoming the largest source of income.
However, during this period, the growth rate of SPD Advantage's corporate loan business slowed down, and the growth rate has been single digits since 2015, which was surpassed by CMB in 2019.
The "loss" of the dominant position made Pufa feel anxious. Subsequently, the slogan of returning to the number one business of the stock bank in 2020 was proposed. Although Pudong Development got its wish that year, the problem of the short-term rapid development of the retail business before began to be exposed.
First, the non-performing loan ratio of SPD continues to increase. It increased from 1.56% in 2015 to 2.05% in 2019, and a significant credit impairment loss was incurred.
In addition, after 2020, the growth rate of both corporate loans and retail loans of the company is slowing down, and it is impossible to transfer the impact of the rapid decline in net interest margin through scale growth, which further increases the pressure on the company's performance growth.
Among them, Pudong Development Bank's corporate loans have rapidly declined to single digits since 2020, after hitting a high of 16.35% in recent years, and the scale in the first half of 2023 was 2.74 trillion yuan, an increase of only 5.46% year-on-year.
The same is true of the growth of retail lending. In 2018, the growth rate was close to 20%, and it will be almost flat in 2022, and even negative growth in the first half of this year. The reason for this is that the growth of the previously fast-growing personal housing, credit card and consumer loan segments has slowed.
In addition, the provision coverage ratio reflecting the "bottom line" of the banking industry is also declining, from 499.6% in 2011 to 159.04% in 2022, just one step away from the regulatory red line of 150%. Obviously, the management also noticed this problem, and in the first half of this year it rose to 170.45%, but it was in the third lowest position of the stock bank.
The lower nuclear charge rate of Pufa is also worth paying attention to. The nuclear charge rate decreased from 10.26% in 2019 to 9.16% in the first half of 2023, which is not conducive to the expansion of the company's scale. Coupled with its own performance stall, hematopoietic capacity declined, and the pace of external financing had to be accelerated. After issuing 50 billion convertible bonds in 2019, it is expected that there will still be financing needs in the future.
Frequent financing will inevitably infringe on the interests of shareholders, and the stability of the company's dividends cannot be guaranteed. From 2019 to 2022, the dividend payout ratio of Pudong Development has dropped from nearly 30% to 18.36%, and the cash dividend ratio has been decreasing, which undoubtedly reduces the company's attractiveness to investors.
For the management change just now, Market Value Watch believes that it is more for the purpose of revitalizing performance and optimizing corporate management. Specifically, the three new managers are all airborne, and Chairman Zhang Weizhong is a veteran of CCB who has achieved great results in the field of inclusive finance, and in the future, SPD may use inclusive finance as a breakthrough in scale.
In addition, Zhao Wanbing and Kang Jie were appointed deputy party secretaries and vice presidents of SPD Bank, respectively. Zhao Wanbing previously worked in the Shanghai financial regulatory department for a long time, and may mainly participate in the operation and management of the company in the future; Kangjie has previous experience in Shanghai Rural Commercial Bank, and agriculture-related business may become the focus of SPD's attention.
It should be noted that this change did not announce the appointment of the president, which also provided imagination for future development. However, it is still too early to think that SPD will usher in a new life from the current management adjustment. Market Cap Watch will continue to pay attention to the next reform measures and the results achieved by this leadership.
disclaimer
This article deals with the content of listed companies, and is a personal analysis and judgment made by the author based on the information publicly disclosed by listed companies in accordance with their statutory obligations (including but not limited to interim announcements, periodic reports and official interactive platforms, etc.); The information or opinions contained herein do not constitute any investment or other business advice, and Market Cap Watch assumes no responsibility for any action resulting from the adoption of this article.
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