Author: Guo Yuxuan, a columnist who understands the economy, and an expert who communicates the planet APP
The performance of China Merchants Bank in 2023 is most appropriately described by Chairman Miao Jianmin's sentence "the background remains unchanged, the foundation is very thick, and the confidence is very strong".
The net profit of 6.22% year-on-year to 146.6 billion yuan, the total assets of 8.77% year-on-year to 11.03 trillion yuan, and various asset quality and financial analysis indicators of steady progress fully prove the strong "family foundation" of China Merchants Bank.
Relying on this solid "family foundation", China Merchants Bank has always insisted on keeping its dreams in moving forward steadfastly.
The so-called persistence is reflected in CMB's determination to adhere to the main strategic position of retail banking, in its confidence in firmly promoting the coordinated development of the four major business sectors of "retail finance, corporate finance, investment banking and financial market, wealth management and asset management", and more importantly, in its sense of responsibility to provide investors with stable capital returns. As for the so-called dream, China Merchants Bank is watching the dual strategic visions of "building a Markley curve" and "building a value bank".
Although some of the bank's figures in 2023 (such as the first decline in total revenue in nearly 14 years) still reflect the multiple challenges it is currently facing, its inherent resilience and dream-chasing spirit can still give investors confidence and expectations.
"Three insistences", steady progress
"Therefore, at this point in time, to continue to maintain the dominant position of retail banks, we must continue to explore and innovate consistently, which is unwavering. Governor Wang Liang's statement at the 2023 China Merchants Bank results conference was resounding.
The first major insistence of China Merchants Bank is reflected in its determination to adhere to the main strategic position of retail banking.
In 2023, the operating income of CMB's retail finance business will be 194.336 billion, accounting for 57.31% of the total revenue; The pre-tax profit was 99.913 billion, accounting for 56.57% of the total pre-tax profit, contributing half of the overall business. The total number of retail customers reached 197 million, an increase of 7.07% from the end of the previous year, and the balance of total retail assets was 13.32 trillion yuan, an increase of 9.88% from the end of the previous year. In addition, China Merchants Bank has also actively updated and explored its organizational structure, and strengthened its extensive online and intelligent reach to retail customers by setting up a new retail customer group.
However, the decline in net interest income and non-interest net income also had a certain impact on the revenue of CMB's retail business. In 2023, the net interest income of China Merchants Bank will be 214.669 billion yuan, a year-on-year decrease of 1.63%. Non-interest net income was 124.454 billion yuan, down 1.65% year-on-year. Among them, the net fee and commission income was 84.108 billion yuan, a year-on-year decrease of 10.78%. At the same time, a number of joint-stock banks have transformed to increase their retail business, and the competition in the retail financial market has intensified, and China Merchants Bank's advantages have been further narrowed under the dual impact of product convergence and price competition.
As a result, there are concerns that China Merchants Bank will shake the strategic main position of retail finance and shift its strategy too much to make up for the growth bottleneck encountered by the retail business. As a result, CMB's market position as the "king of retail" will be challenged, and it will lose its original retail business characteristics in the balanced development.
The statement of adhering to the main strategy of retail at the senior performance conference of China Merchants Bank undoubtedly reassured the majority of investors.
It is the unchanging background of China Merchants Bank to unswervingly insist on giving full play to the historical advantages of retail banks and forging a new retail "moat" through product system innovation and reform.
The second major insistence of China Merchants Bank is reflected in its confidence in firmly promoting the coordinated development of the four major business segments of "retail finance, corporate finance, investment banking and financial market, wealth management and asset management".
"It is difficult to rely solely on the development of retail banking. As the saying goes, "go fast alone, go far together", and all sectors must develop in tandem to better support retail entities. "While consolidating the advantages of the main retail business, China Merchants Bank has made all-round efforts in the fields of public finance, investment and wealth management to build a world-class comprehensive bank, which is the confidence of China Merchants Bank.
In 2023, China Merchants Bank will actively respond to the decision and deployment of the CPC Central Committee to do a good job in the "five major articles" of finance, combine its own characteristics, advocate the "seven major finance" strategy, focus on the direction of modern industrial economic transformation and upgrading, create seven characteristic service advantages of digital intelligent finance, technology finance, green finance, intelligent manufacturing finance, cross-border finance, inclusive finance and industry finance, insist on making the company's financial business more refined and stronger, and create new business growth poles. In 2023, the total number of CMB customers will be 2,820,600, an increase of 11.66% from the end of the previous year; The balance of the company's customer deposits was 4.66 trillion yuan, an increase of 5.17% over the end of the previous year, and it won the key battle of defending the public customer base and deposits in stages under the condition of the overall economic downturn.
Under the guidance of the concept of "integration of investment and commercial banks", China Merchants Bank adheres to the principle of specialization and innovation in the investment business, and advocates the professional development path of "small but beautiful". In 2023, CMB's investment banking business contributed 14.91% to the company's total customer financing (FPA) balance compared with the beginning of the year, and relied on a powerful and convenient trading platform to continue its glory as the No. 1 in the market in terms of discount volume of commercial acceptance bills.
At the same time, as an important product line supporting the development of retail banking business, it is also important to continue to expand and strengthen the wealth management and asset management business. However, at present, the performance of China Merchants Bank in this sector is lower than market expectations. In 2023, the revenue of China Merchants Bank's large wealth management will be 45.268 billion yuan, a year-on-year decrease of 7.9%. Among them, wealth management fees and commission income was 28.466 billion yuan, a year-on-year decrease of 7.89%.
At the results conference, Peng Jiawen, secretary of the board of directors of China Merchants Bank, attributed the reason for the decline in the performance of this sector to three factors: "the decline in business volume, the change of business structure, and the policy of fee reduction and profit concession". Among them, the impact of the decline in the income of the fund business of China Merchants Bank due to the fluctuation of the capital market and the general pressure on equity products is the most direct and the most difficult to deal with. However, it is believed that under the guidance of the three major directions of "capturing customer groups, grasping the AUM improvement of existing customers, and making good product structure arrangements", China Merchants Bank will be able to take steps to minimize the impact of the economic cycle on wealth management performance by virtue of the advantages accumulated in the retail sector over the years.
Adhering to the coordinated development of the four major businesses and being an all-round business "all-rounder" is the foundation for the steady and long-term development of China Merchants Bank.
In addition, it is worth mentioning that the word "synergy" in the "coordinated development of the four major business sectors" is crucial to understanding CMB.
Insisting on making the company's financial business more refined and stronger, insisting on specializing and innovating the investment business, and insisting on making the wealth management and asset management business bigger and stronger are essentially to help the prosperity and development of the main retail business of China Merchants Bank. On the basis of maintaining the main position of retail finance and strategy, the key direction of CMB's strategy is to promote the coordinated development of various sectors to empower the main retail business, rather than weakening the core position of retail through balanced development.
The third major insistence of China Merchants Bank lies in its sense of responsibility to provide investors with stable capital returns.
After the results conference of China Merchants Bank, what impressed all the audience the most was Chairman Miao Jianmin's sentence on the dividend policy: "The dividend payout rate has increased, and there is no plan to come down". In the context of continued pressure on its own revenue, the public announcement of an increase in the dividend payout ratio is indeed a little surprising to the CMB.
In this regard, Chairman Miao Jianmin explained: Since most shareholders did not make much or no money on capital gains last year, a little increase in dividends can improve the overall return of shareholders. He also said that in the future, China Merchants Bank will continue to balance the relationship between cash dividends and medium and long-term capital accumulation, maintain a relatively strong endogenous growth ability of capital while not doing equity financing, and maintain a reasonable and high dividend ratio, so as to coordinate the relationship between the three.
It is undeniable that CMB's increase in the dividend rate is to a certain extent due to the strategic consideration of improving valuation and shaping the image of "high dividends and low valuation" value stocks, but the practice of increasing dividends to repay investors' trust is still worthy of praise and learning. In the face of multiple challenges, even though China Merchants Bank itself needs to tighten its belts to live a "tight life", it has never considered reducing investors' rights and interests, and the sense of responsibility that it shows behind it is really gratifying to insist on putting investors' interests first.
Insisting on increasing the dividend return of investors is the confidence of China Merchants Bank to interpret the responsibility of the "leader" of the joint-stock system with practical actions.
Guided by the "Three Insistences", China Merchants Bank has achieved a dynamic and balanced development of "quality, scale and efficiency" in 2023, which is in line with market expectations.
"Two dreams", the road ahead
On February 1, 2024, China Merchants Group held the 2024 annual work conference in Shenzhen to deploy and accelerate the "third entrepreneurship" in an all-round way.
As an important member of the group's financial sector, China Merchants Bank naturally needs to be at the forefront without hesitation. In order to realize the long-cherished dream of "starting a business for the third time", China Merchants Bank needs to strive to keep an eye on the two dreams of "building a Markley curve" and "building a value bank".
Constructing the Markley Curve, in short, is to achieve long-term success through transformation and change across the impact of economic cycles. In addition to actively exploring the coordinated development of the four major business sectors and looking for new growth points in addition to the retail business, China Merchants Bank in 2023 also gave the answer of "building a new moat with smart banking as the core". At this results conference, the senior management of China Merchants Bank also used a long time to elaborate on the transformation goals of "smart China Merchants Bank" for the first time around the development direction of "online, data, intelligent, platform-based and ecological". In 2023, China Merchants Bank will continue to increase its investment in science and technology, and the ratio of investment to total revenue will continue to rise. China Merchants Bank attaches great importance to deepening the service capability of "people + digitalization", increasing the coverage of "digital and intelligent retail", replacing more than 17,000 people with AI Xiaozhao, and the number of users of the China Merchants Bank APP has also successfully exceeded the 200 million mark. It is imperative to use the digital and intelligent development of intelligent banking to achieve strategic iteration and build a unique "Markley Curve".
Building a value bank is believed to be familiar to readers who care about China Merchants Bank. However, when the concept was first proposed, more people regarded the Western-oriented ESG strategy of "creating more diversified value for shareholders, customers, and society" as an empty slogan. In the midst of the economic downturn, there are doubts in the market about whether China Merchants Bank can adhere to the concept of "value bank". However, in 2023, China Merchants Bank's measures to increase the dividend rate have interpreted the "value" of China Merchants Bank with practical actions. Not limited to the gains and losses of one city and one pool, with long-term companionship and perseverance to warm shareholders, customers and society, the pursuit of multi-party interests and win-win, CMB Road ahead.
The reason why this article refers to "building the Markley Curve" and "building a value bank" as the two major dreams of China Merchants Bank is that these two goals are relatively long-term and ambitious at this stage, and it is difficult to estimate the probability of future success based on the performance of just a few years, and it takes a longer time to pursue and explore.
From this point of view, China Merchants Bank, which has been established for 37 years, may have just begun its journey of chasing dreams.
What China Merchants Bank can do is to keep its dreams in perseverance, look up to the stars, be down-to-earth, and unswervingly move forward towards the goal of "contributing a real commercial bank to China".