#精品长文创作季#
Author: Xu Feng, Editor: Xiao Shimei
As the youngest joint-stock bank, Bohai Bank's performance seems to be a little lacking. According to the company's recently released 2023 financial report, the operating income was 24.997 billion, a year-on-year decrease of 5.55%, and the net profit was 5.081 billion, a year-on-year decrease of 16.81%, continuing the situation of double decline in performance in 2022.
On the whole, although Bohai Bank will perform remarkably in non-interest income in 2023, its lower net interest margin, large credit impairment and risk indicators close to the warning line indicate that there is still a lot of room for improvement compared with the top joint-stock banks.
[Non-interest income burden]
Looking back on the past, 2019 was the "highlight moment" of Bohai Bank's revenue and net profit growth in recent years, and it was still able to maintain a double-digit mid-to-high growth rate, and the revenue growth rate even exceeded 20%. But since then, the pace has continued to slow down.
It can be seen that since 2019, the growth rate of Bohai Bank's net profit has been significantly lower than its revenue, and only 2021 has been an exception in the past five years, and the gap between 2022 and 2023 will become more and more obvious, underperforming revenue by 19.88% and 11.26% respectively.
The reason for Bohai Bank's sluggish performance was mainly due to the rapid decline in net interest margin. As early as 2020, Bohai Bank's net interest margin reached a maximum of 2.35%, and since then it has been declining, falling to 1.14% in 2023, a decrease of 1.21%.
In 2020, Bohai Bank's net interest margin ranked third among the 10 listed banks, second only to China Merchants Bank and Ping An Bank, the leading joint-stock banks. However, in 2023, it will rank first from the bottom among the 8 joint-stock banks that have announced financial reports.
The rapid decline in Bohai Bank's net interest margin was mainly due to the large decline in the yield on interest-bearing assets and the high cost of interest payment.
As we all know, the pressure on interest rates in the banking industry has been a common problem in recent years, and in 2020, the yield on interest-bearing assets of Bohai Bank ranked first among joint-stock banks, at 4.94%, and by 2023, it will drop to 3.9%, ranking 6th among the 8 joint-stock banks that have announced financial reports.
Higher interest payment costs are also eroding Bohai Bank's net interest margin. In 2020, the company's debt-to-cost ratio was 2.76%, and it will not improve much in 2023, only decreasing by 0.06% to 2.71%, which is still significantly different from China Merchants Bank's 1.73% and Ping An Bank's 2.28% in the same period.
While Bohai Bank's main business declined, non-interest income stood up to take the lead, achieving revenue of 7.351 billion, an increase of 93.63% year-on-year.
In 2023, the intermediary business income of handling fees will be 4 billion, an increase of 55.65% year-on-year, and the proportion of revenue will increase from 9.71% in 2022 to 16%, mainly due to the agency business handling fee of the largest business increased by 121.86%. Others, including custody, consulting services and bank card fee income, still fell by more than 20%.
In addition, Bohai Bank's other non-interest income was 3.352 billion, an increase of 173.12% year-on-year, thanks to the contribution of transaction income and net income from financial investment. However, other non-interest income is not stable, and the exchange gains in trading income and net income from financial investments measured at fair value are greatly affected by exchange rates and the stock market, and it remains to be seen whether they can continue to improve in the future.
The sharp slowdown in the growth rate of Bohai Bank's net profit is also closely related to the company's risk exposure of non-performing assets.
[Why is growth slowing]
In addition to the impact of interest margins, Bohai Bank's net profit was also constrained by the impairment of a large number of assets due to lax risk control.
In terms of risk indicators, Bohai Bank's non-performing loan ratio will reach 1.78% in 2023, ranking first among the eight joint-stock banks that have announced financial reports. Looking further back, since 2018, the company's non-performing loan ratio has been between 1.76% and 1.85%, ranking low among joint-stock banks.
Bohai Bank's high NPL ratio also generated a large number of asset impairment losses, which increased from 6.508 billion yuan to 13.224 billion yuan from 2018 to 2020, an increase of more than 1 time, seriously squeezing the net profit margin. Although the net profit was growing during the period, the growth rate of 3.07% in 2020 was significantly slower than that of 15.71% in 2019.
The reason for this is the impact of the company's net interest margin. In 2019, the company's net interest margin increased significantly by 0.68% to 2.22% year-on-year, which correspondingly reduced the pressure on the growth of impairment losses on some assets. However, in 2020, the net interest margin only increased to 2.35%, an increase of only 0.13%, which is far from the doubling of asset impairment losses.
Under such circumstances, the net profit of Bohai Bank in 2020 still achieved positive growth, which is inseparable from the sharp reduction of the provision coverage ratio. from 187.73% in 2019 to 158.8% in 2020, a decrease of 28.93%.
It has to be said that the provision coverage ratio played the role of a "regulator" when the downward pressure on Bohai Bank's net interest margin was greater. In 2021, the company's net interest margin decreased significantly by 0.63% to 1.72%, but net profit still increased by 2.19%, due to the provision coverage ratio falling sharply by 23.17% to 135.63%, which is already below the regulatory warning line.
Since then, Bohai Bank's provision coverage ratio has risen to more than 150% again, but the water level is still low.
Bohai Bank's poor asset quality severely limited the growth of its asset scale. In 2023, the company's total assets will be 1.73 trillion yuan, an increase of 4.4%, but the loans and advances issued will be 920.395 billion, a year-on-year decrease of 2.37%, but the financial investment assets will grow rapidly, reaching 633.136 billion, a year-on-year increase of 16.27%.
In addition, Bohai Bank's low recharge rate has also constrained the growth of asset scale. In 2023, it will be 8.17%, ranking last among the 8 stock banks that have announced their financial reports. In order to supplement the recharge rate, Bohai Bank has made frequent financing moves in recent years, raising funds through various channels such as Hong Kong stock listing, private placement, and bond issuance. On April 7, Bohai Bank was again approved to issue 15 billion bonds.
At present, the lack of growth momentum of Bohai Bank has been reflected in the sluggish stock price. As of April 19, the closing price of HK$0.96 per share from the highest point in 2020 has fallen by 82.92%, and the market value has shrunk by HK$82.762 billion.
It is time for Bohai Bank to make great efforts to rectify its internal control.
[It is urgent to improve internal control]
In terms of internal control, in recent years, Bohai Bank has received large fines for lax risk control.
For example, in 2023, Bohai Bank was fined several times. In February, it was fined 16.6 million yuan for 5 counts of misappropriation of loan funds for small and micro enterprises to purchase wealth management and illegal issuance of commercial housing loans, and in the same month, it was fined 8.6 million yuan for 13 violations of 13 violations, including misstatement of wealth management business data and inaccurate calculation of risk-weighted assets, and in March, a total of 16.96 million yuan was confiscated for 12 articles involving violations of deposit reserve management, account management, and violations of relevant regulations on RMB anti-counterfeiting.
According to statistics, the company will be fined more than 43 million in 2023, which is significantly higher than the 17.46 million in 2022. In addition, in May 2021, the company was fined as much as 97.2 million yuan for 34 clauses, including issuing loans to real estate projects with insufficient capital and issuing land reserve loans in violation of regulations.
Overall, Bohai Bank's violations in the areas of anti-money laundering, account and clearing management, post-loan management, and real estate are relatively serious.
In terms of industry, real estate, as the second largest industry, has continued to increase in the non-performing rate in recent years. As early as 2019, it was only 0.14%, and in 2021, it rebounded to 3.71%, and it is still not effectively controlled, and it will still be 3.65% in 2023. At the same time, the manufacturing, wholesale and retail trade, and construction industries also have higher defect rates.
Specifically, Bohai Bank has repeatedly stepped on thunder and risked enterprises, including Zhengyuan Real Estate, Oceanwide Holdings, Evergrande Real Estate, Shengyun Environmental Protection, etc., among which the situation of stepping on thunder Oceanwide is more serious. As the seventh largest shareholder of Bohai Bank, Oceanwide has not yet repaid the due principal of 1.713 billion yuan of its subsidiary China Oceanwide Group in November 2023, and 7.72% of the company's shares held by Oceanwide have been frozen.
According to the financial report, in 2023, Bohai Bank will extend a total credit of 8.402 billion yuan to Oceanwide and its related parties, and it is unknown how many potential risks there are in addition to the known risk funds.
Bohai Bank did not disclose Evergrande's arrears, but according to the statistics of Phoenix.com Finance, the execution amount of cases involving Evergrande has been disclosed in May 2023 to 52.5517 million, and there are still more than 200 lawsuits that have not disclosed the amount. It is worth mentioning that in March 2023, Bohai Bank was blacklisted by the Hunan Provincial Department of Housing and Urban-Rural Development due to the unauthorized deduction of Evergrande commercial housing pre-sale supervision funds, resulting in insufficient funds for the resumption of work and production of the project.
In addition, in October 2021, Bohai Bank was also caught in the "Rashomon" incident, and the incident of Jemincare's 2.8 billion deposits being inexplicably pledged at that time caused a sensation. According to the preliminary investigation by the relevant departments, the seals on the materials for handling the loan pledge business are suspected of being forged. Since then, there has been no progress on the news.
For the current problems of Bohai Bank, the new leader is facing a big test. In July 2023, Li Fuan, the former chairman of Bohai Bank, retired, and Wang Jinhong took over. Unlike Li Fuan's previous long-term tenure in the regulatory authorities, Wang Jinhong belongs to the old Bohai Bank, and has successively served as the company's vice president, president of Tianjin Branch, Binhai New Area Branch, and chairman of Haihe Industrial Fund. The present is back again, and the pressure for the future is not small.
As a young player in the joint-stock bank, Bohai Bank did not reflect the volume advantage in terms of performance growth, but the weakness became more and more obvious. It is urgent for the new chairman to solve the risk control problem as soon as possible, reduce the interest payment cost and increase the net interest margin.
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