Why was Zheshang Bank fined again?
Author: Xu Feng, Editor: Xiao Shimei
Recently, the State Administration of Financial Supervision and the supervision bureaus of many places have disclosed a batch of fines. Nearly 15 banks and financial institutions were fined a total of more than 45 million, of which Zheshang Bank was fined the most, with a total fine of 18.195 million yuan for its three branches.
In recent years, Zheshang Bank has received a lot of fines, and this time it has been punished by a large order, and the problems of internal control management have been exposed more and more obviously.
[The fines are mainly for "old diseases"]
According to media statistics, in 2023, Zheshang Bank will receive more than 28 million fines, and the amount of fines this time accounts for more than half.
Specifically, among the three branches, the Shanghai branch was fined 17.345 million yuan for "absorbing deposits and issuing loans by improper means", and as many as 13 relevant responsible persons were banned from business, warned and fined. The penalties for the Ningbo branch and the Lianyungang branch were relatively light, with a total fine of no more than one million, and the relevant responsible persons were also punished.
It can be clearly seen that the Shanghai branch of Zheshang Bank was the most seriously fined, and the root cause was mainly related to the business transactions of Gu Qingliang, the former president of the branch. And he was also banned for life in this punishment.
It should be noted that Gu Qingliang's specific departure date was at the end of 2018, and he was ousted in 2020 due to corruption. Therefore, the internal control problems of the Shanghai branch are mainly based on "old diseases".
At the same time, the other 12 persons responsible for the fines were also related to the illegal business. Including Lin Fei, then Deputy General Manager of the Wealth Management Center of the Branch, Liu Desheng, then Vice President of the Branch, Zhou Bufei, Risk Monitoring Officer and Vice President, and other senior executives of important business departments.
As for the specific reasons for Zheshang Bank's deposit and loan business by "improper means", although the regulatory penalty is not specifically specified, it can be seen from the 101 million sky-high fine issued by the regulator to Zheshang Bank in 2020.
At that time, Zheshang Bank had as many as 31 non-compliant clauses, mainly related party transactions without the approval of the Related Party Transaction Commission, illegal use of wealth management funds for capital increase of insurance companies, and false off-balance sheet of non-performing assets, which were of a relatively serious nature.
Among them, the violations involving deposits and loans mainly include: using insurance asset management companies as a channel to illegally reverse the deposit of interbank funds into general deposits, inflating general deposits for other banks by investing in the right to benefit from the certificates of deposit of other banks, investing in false underlying claims and requiring customers to inflate deposits by way of pledge of deposit receipts, depositing deposits with other banks through special purpose vehicles and providing pledge guarantees, and other banks providing financing to the bank's credit customers.
A series of "complex" illegal operations of Zheshang Bank show that not only the Shanghai Branch, but also the Bank as a whole also had similar improper operations. In addition, the penalty also mentions the violation of Zheshang Bank's inflated deposits for other banks.
In addition, at that time, the regulator's punishment for the Shanghai branch was "confusion in the authorization of wealth management business", and Gu Qingliang himself was warned and fined 300,000 yuan for illegally selling wealth management products to achieve false off-balance sheet assets, and illegally selling wealth management products to help counterparties achieve false off-balance sheet assets.
The Shanghai branch of Zheshang Bank was punished by a large order this time, which is just a microcosm of the company's internal control problems over the years.
[Internal control problems have been around for a long time]
In recent years, Zheshang Bank's internal control problems have been criticized by the market, and many fines have been imposed on credit review, off-balance sheet business and real estate.
For example, Zheshang Bank has been punished many times before for violating the rules of "improper means to conduct deposit and loan business".
For example, in September 2022, the Zhengzhou branch was fined 1.4 million yuan for three major matters, including the transfer of loans into margins, and in November of the same year, the Hangzhou branch was fined 4 million yuan for inflating deposits and loans through asset pools, debt financing plans, receivables confirmation and other businesses, and increasing financing for real estate enterprises in disguised form through receivables confirmation and domestic letters of credit in the name of construction enterprises.
Zheshang Bank's off-balance sheet and non-standard assets are also a high incidence of violations. The scale of the company's off-balance sheet business is large, including bank acceptance bills, letters of credit, receivables confirmation and other financial guarantee contracts. In the first half of 2023, the scale will reach 768.01 billion, accounting for more than 25% of the 2.9 trillion assets.
Taking the recent penalties of Zheshang Bank as an example, in November 2023, Guiyang Branch was fined RMB 1.6 million for five violations, including the untrue background of L/C trade, the return of negotiated funds to the issuer, and the rolling issuance of bank acceptance bills and inflated deposits.
In the non-standard asset business, the typical one is the violation of debt financing plans, which have been clearly identified as non-standard assets in the new asset regulations in 2019. For example, in November 2022, the Hangzhou branch was fined for inflating deposits and loans through the debt financing plan, and in November 2023, the punishment for the Guiyang branch also included the lack of investment control over the debt financing plan.
In addition, there is a trend of widening exposure in the real estate sector. At present, real estate is still an important business item of the company, accounting for more than 10% of corporate loans in the first half of 2023. As early as 2019, the industry's NPL rate was only 0.29%, and in the first half of 2023, it rose to 2.31%, dragging down the company's asset quality.
Among the main loan customers of Zheshang Bank, the relatively high proportion of real estate enterprises is also worth paying attention to. Four of the top 10 customers in the first half of 2023 are in the real estate sector.
The problem of inadequate loan review of Zheshang Bank has also appeared in the punishment list of the regulator many times, which is manifested in the fact that it has stepped on many big thunders such as Zhongkangmei Pharmaceutical, Shenwu Group, Peking University Founder, and Group Loan Network.
According to statistics, from 2020 to 2023, Zheshang Bank has been fined more than 160 million yuan, of which the 100 million yuan fine in 2020 accounts for the majority, and it ranked second in the list of fines of joint-stock banks that year.
It is worth mentioning that in addition to the big fine in 2020, Zheshang Bank was also fined 55.5 million yuan in a single time as early as 2018 for failing to conduct due diligence on investment in interbank wealth management products, using misleading language in the sales text of wealth management products, and illegal investment in personal financial management.
In addition to the ineffective risk control of the main business, the internal control problems of Zheshang Bank are also accompanied by serious management corruption. For example, in recent years, it has been revealed that Shen Renkang, the former chairman of the board of directors, Gu Qingliang, the former president of the Shanghai branch, Zhang Changgong, the former vice president, and Xu Bing, the former vice president of Zhejiang Commercial Industry and Finance, have been investigated.
Behind the frequent fines of Zheshang Bank, it is inseparable from the previous aggressive strategy of the management.
[Still in the throes of de-risking]
Zheshang Bank's previous excessive pursuit of scale and neglect of risk control is an important reason for the frequent occurrence of internal control problems and continuous thunderstorms.
From the perspective of the development history of Zheshang Bank, its establishment time is not long, formerly known as Zhejiang Commercial Bank, is a Sino-foreign joint venture bank established in 1993, approved by the China Banking Regulatory Commission in 2004, after restructuring and restructuring into the current Zheshang Bank.
In the 10 years from the establishment of Zheshang Bank to 2014, under the leadership of the first president Gong Fangle, the company took the "one body, two wings" strategy as the core, that is, with the company's business as the main body, small enterprises and investment banking business as the two wings, the total asset scale has grown rapidly from more than 10 billion yuan to more than 600 billion yuan, and the overall risk exposure is not obvious.
In 2014, after Liu Xiaochun, the company's second president, took office, the business strategy changed to a "full-asset management strategy", with a greater focus on scale growth.
The so-called "all-asset management strategy" means that while developing traditional credit, it also strengthens cooperation with interbank and non-bank financial institutions to achieve "interbank expansion and investment and loan linkage". As a result, the scale of Zheshang Bank has expanded rapidly, and the scale of assets has continued to grow by leaps and bounds.
By the time Liu Xiaochun left office in 2018, the assets of Zheshang Bank had exceeded 1.5 trillion yuan, more than doubling in four years. But the risks were gradually exposed, and the many big thunders that he stepped on appeared in the era of Liu Xiaochun.
The third president, Xu Renyan, put forward the Internet platform service strategy, emphasizing "technology + finance", and did not put de-risk at the strategic level, so the "sequelae" of the previous thunder was gradually reflected in the report.
For example, the company's non-performing loan ratio increased from 1.2% in 2018 to 1.53%, the highest in 2021, and its ranking fell from the first place in the joint-stock bank that year to the sixth place. Since then, although the defective rate has fallen, it will still be 1.45% in the first three quarters of 2023, which is not a low level.
At the same time, Zheshang Bank's aggressive expansion has also resulted in huge credit impairment losses, suppressing the growth of net profit. The net profit margin indicator directly reflects the erosion of profits by credit impairment, which is only 26.39% in the first three quarters of 2023, ranking 7th among 9 joint-stock banks.
After Zhang Rongsen, the current president of Zheshang Bank, took office, he began to promote the transformation of retail business, and took de-risk as an important business policy. It is only in the first half of 2023 that the growth of the company's credit impairment scale has been curbed.
The company's prolonged depressed share price also illustrates this problem. Since the company's listing in November 2019 hit a new high of 4.29 yuan/share, the stock price has been in a state of shock and decline for a long time, and has recently fallen to about 2.65 yuan/share, a decline of nearly 40% during the period.
On the whole, there is not much time left for Zheshang Bank to improve the internal control of the enterprise, and if it is not resolved as soon as possible, it may even drag down the growth of asset scale in the future.
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