Directly hit the performance briefing of Zheshang Bank: In the next few years, it is expected to maintain a high dividend of more than 30%, and the long-term investment value may appear

Xie Huiqian, chief reporter of Shenzhen Business Daily and Reading Client

The annual report season of listed banks has come to an end, among which Zheshang Bank has attracted much attention from the market due to its performance growth rate leading the industry, the strategic guidance of good financial finance, and the completion of financial rectification.

Following the results conference held in Hong Kong, Zheshang Bank held a domestic performance briefing in Shenzhen on April 17, attended by Lu Jianqiang, Chairman of Zheshang Bank, and Zhang Rongsen, President of Zheshang Bank, and exchanged views with investors, institutional analysts and media on issues of external concern such as business strategy, asset quality, interest margin trend and dividend rate.

(Photo provided by the organizer)

According to the financial report, as of the end of 2023, Zheshang Bank's revenue growth rate has remained the first among national joint-stock banks for 10 consecutive quarters, with double-digit growth in net profit, total assets reaching a new level of 3 trillion yuan, and net interest margin of 2.01%. Company executives said that the dividend is expected to remain above 30% in the next few years, sharing the fruits of development with investors.

Three key scale growth indicators ranked first

According to the financial report, among the listed joint-stock banks that have disclosed their annual reports, Zheshang Bank ranks first in three key scale growth indicators, namely: total assets increased by 19.91% over the beginning of the year, of which loans and total loans increased by 12.54% over the beginning of the year, and the balance of deposits absorbed increased by 11.13% over the beginning of the year.

Among them, the asset scale exceeded 3 trillion yuan, mainly due to the steady growth of loans and financial investment. The bank disbursed loans and advances of RMB1,716.24 billion, an increase of 12.54% from the beginning of the year.

While the asset scale has achieved steady growth, Zheshang Bank has also achieved remarkable results in reducing non-performing loans and controlling risks: by the end of 2023, the non-performing loan ratio of Zheshang Bank has dropped to 1.44%, achieving two consecutive years of decline. Compared with the non-performing loan ratio of the banking industry in the fourth quarter of 2023 of 1.59%, it is better than the industry average.

At the same time as the NPL ratio decreased, Zheshang Bank's provision coverage ratio increased for two consecutive years: the provision coverage ratio in 2023 was 182.6%, an increase of 0.41 percentage points from the end of the previous year, and the issuance of A+H shares at the end of 2023 to supplement the core Tier 1 capital, and the issuance of Tier 2 capital bonds to supplement the Tier 2 capital, as of the end of 2023, the capital adequacy ratio was 12.19%, an increase of 0.59 percentage points from the end of the previous year.

At the performance briefing, the bank gave detailed answers to the asset quality issues that are of the highest concern to the market. In terms of incrementality, Zheshang Bank stated that it adheres to the risk appetite of "prudent and prudent" and the principle of "small amount and diversification", strictly implements the credit concentration control of the industry and customers, adheres to the concept of "financial goodness" and the business strategy of "building the ballast stone of weakly sensitive assets in the economic cycle", promotes the optimization of the bank's business structure, and makes the risk appetite and business strategy more stable. At the same time, risks have been effectively controlled by strengthening the control of the whole credit process, promoting the construction of digital and intelligent risk control, and strengthening the management of expiry and interest collection.

In terms of stock, Zheshang Bank promoted special actions for risk prevention, control and resolution, and comprehensively used methods such as cash collection, strategic transfer, resolution, write-off, and securitization of non-performing assets to go all out to resolve stock risks. It is reported that Zheshang Bank has completed the rectification of the return of the principal of all wealth management cases by the end of 2023, completing the rectification task one year ahead of schedule. It is worth mentioning that at the end of 2023, the wealth management subsidiary was officially approved for establishment, and the wealth management business will reach a new starting point in the future.

Seventy per cent of the new loans will be invested in small, diversified assets

At present, the real estate industry is still in the process of adjustment and transformation, some small and micro enterprises are slow to recover, and bank operations are still facing expected risk pressure.

It is reported that Zheshang Bank has taken the initiative to adapt to the changes in the business environment and formulated a "1+6" decision-making guarantee mechanism ("1" is the decision-making mechanism of the senior management; "6" is the six major resource guarantees: resource allocation mechanism, performance appraisal mechanism, price insurance approval mechanism, multi-cross coordination mechanism, risk management and control mechanism and digital technology support mechanism and other supporting guarantee mechanisms), and implemented differentiated business philosophy and strategy play such as smart operation and building the ballast stone of weakly sensitive assets in the economic cycle, which effectively promoted the sustainable development of business scale, efficiency and quality.

After nearly two years of practical exploration, the above-mentioned business strategy has not only attracted considerable attention from the outside world, but also withstood the test of practice. According to the financial report data, in 2023, Zheshang Bank will achieve revenue of 63.704 billion yuan, an increase of 4.29% over the previous year, net profit attributable to shareholders of the bank will be 15.048 billion yuan, an increase of 10.50% over the previous year, and the growth of net interest income will remain stable, an increase of 0.99% over the previous year.

Against the backdrop of narrowing interest margins, it is not easy to maintain a stable net interest income. As of the end of 2023, Zheshang Bank's revenue from weakly sensitive assets in the economic cycle reached 20.285 billion yuan, accounting for 33.02% of the revenue, an increase of 4.49 percentage points from the beginning of the year and an increase of 8.68 percentage points from the time it was proposed, and the revenue growth rate of weakly sensitive assets in the economic cycle was 20%, far exceeding the revenue growth rate of the whole bank. In addition, the non-performing loan ratio of weak cyclical industries was only 0.33%, far lower than the average non-performing ratio of the whole bank, and the ability to survive the cycle continued to improve.

Up to now, the strategy of weakly sensitive assets in the economic cycle has been implemented for two years, and some investors are further concerned about what strategies will Zheshang Bank focus on in 2024 and what will be the deployment method?

In this regard, Zhang Rongsen said, "In 2024, we will unswervingly implement the smart business strategy, continue to build the ballast stone of weakly sensitive assets in the economic cycle, deepen the investment in weak-cycle industries around the 'five major articles', continue to tap the potential of green income, and continue to improve the ability of smart management." In terms of specific actions, it mainly includes giving priority to the allocation of small diversified assets, and 70% of the new loans should be invested in small diversified assets, increasing the proportion of assets in weak cyclical industries, earning more green medium income and green income, and unswervingly reducing the interest payment rate of deposits. Strive to steadily increase the proportion of revenue from weakly sensitive assets and smart revenue in the economic cycle, and adjust the structure of customer structure and income structure with asset structure adjustment. ”

The dividend ratio is leading, and the long-term investment value may appear

According to the financial report, in 2023, Zheshang Bank will maintain a net interest margin of 2.01% higher than the industry average, and in the context of narrowing interest margins, it will achieve non-interest net income of 16.176 billion yuan by building a diversified non-interest income structure, an increase of 15.35% over the previous year, and its proportion in revenue will increase to 25.39%, an increase of 2.43 percentage points over the previous year, contributing more than 80% of the revenue increment, effectively making up for the impact of the narrowing of interest margins.

Supported by good performance, Zheshang Bank continues to pay dividends to improve shareholders' return on investment and share the fruits of high-quality development with investors. In addition to the impact of the allotment process in 2021, Zheshang Bank has carried out high dividends in 2019, 2020 and 2022, and plans to pay dividends of 1.64 yuan per 10 shares to shareholders of A shares and H shares this year, with a total cash dividend of 4.5 billion yuan (including tax), with a dividend ratio of 31.98%, ranking among the top in the industry, and the total amount of cash dividends is also higher than that of the previous year. Since the listing of H-shares, from 2016 to 2023, the cumulative cash dividend ratio of Zheshang Bank has ranked among the top joint-stock banks.

Luo Feng, Vice President of Zheshang Bank, pointed out that "Zheshang Bank has always attached great importance to the return of cash dividends to public investors. In the foreseeable long term, the Bank is confident that the annual cash dividend ratio will be maintained at 30% or above. ”

Some analysts believe that so far in 2024, the A-share share price of Zheshang Bank has risen by nearly 20%. On the whole, the profitability of Zheshang Bank is sustainable, the dividend ratio is expected to remain stable, the dividend yield remains high, the valuation is still at a relatively low level, and the long-term investment value may appear.

Review: Sun Shijian