Written by: Planets
Source: Bedo Finance
Once upon a time, Shengjing Bank (HK: 02066), as the leader of the Northeast City Commercial Bank, can be said to have many halos, and was once regarded as a model for many small and medium-sized banking institutions. However, after the thunderstorm of Evergrande Group, the largest shareholder in the past, the disadvantages of Shengjing Bank's deep binding to the real estate industry have also emerged one by one.
According to the 2023 annual report, Shengjing Bank's asset quality has improved due to the efforts of strengthening internal control and optimizing the structure, but the non-performing rate is still higher than the industry average, and the dark cloud of "Evergrande" still hangs over the bank. Not only that, Shengjing Bank's operating performance fell sharply, and its asset scale even declined.
This "model student" of a commercial bank in Northeast China has gradually faded from its former glory and has become a "penny stock" with a stock price hovering at HK$0.7 per share. It is difficult to revive the confidence of the secondary market and the commercial market and get rid of the historical "baggage" left behind.
First, the performance is declining, and the asset scale has retreated
According to the 2023 financial report, Shengjing Bank achieved revenue of 10.04 billion yuan, not only a year-on-year decline of 37.8%, but also a record low in five years. Among them, net interest income was 8.866 billion yuan, down 31.0% year-on-year; Non-interest net income was RMB1.174 billion, down 64.4% year-on-year.
As for the decline in operating income, Shengjing Bank explained in its annual report that it was due to the continuous reduction of LPR, the low operation of market interest rates and changes in asset structure; The return on assets declined year-on-year, and interest income decreased year-on-year; The year-on-year decrease in the income from the disposal of bond assets and the year-on-year decline in non-interest income.
But in fact, Shengjing Bank's decline has continued for several years. Since the bank's revenue reached a record high of 21.007 billion yuan in 2019 and its asset scale has entered the trillion club, it has gone downhill, with revenue of 16.266 billion yuan and 15.466 billion yuan in 2020 and 2021 respectively, and a slight rebound of 4.44% to 16.153 billion yuan in 2022.
Shengjing Bank's operating efficiency is also not optimistic. The financial report shows that the bank's net profit attributable to the parent company in 2023 will be 732 million yuan, a year-on-year decrease of 25.3%, and its profit changes are also similar to the income side, with net profits of 5.443 billion yuan, 1.204 billion yuan, 402 million yuan and 980 million yuan from 2019 to 2022 respectively, showing an overall downward trend.
At the same time, Shengjing Bank's profitability indicators have also fallen to varying degrees. The bank's average return on total assets in 2023 was 0.07%, down 0.03 percentage points year-on-year and only about one-eighth of that in 2019, and the net interest margin was 1.14%, down 0.26 percentage points from 1.40% in 2022.
What's more unusual is that Shengjing Bank's asset scale has not advanced but retreated, with total assets of 1,080.053 billion yuan at the end of 2023, a decrease of 2.360 billion yuan, or 0.2%, from 1,082.413 billion yuan in the same period of 2022, mainly due to the optimization and adjustment of its asset structure.
Specifically, the total amount of loans and advances issued by Shengjing Bank decreased by 22.1% from 613.362 billion yuan at the end of 2022 to 477.877 billion yuan at the end of 2023, and the proportion of total assets also decreased from 56.7% to 44.3%. Among them, the bank's corporate loans (including bill discounting) decreased by 28.1% from the end of 2022 to RMB369.327 billion.
Shengjing Bank said that the bank takes high-quality development as the transformation orientation, and increases support for the real economy and key areas based on the "three services"; Deepen and broaden cooperation with high-quality customers, and rely on supply chain finance to help business development such as "Liaoning Trade Loan" and "Credit Insurance Financing"; At the same time, through asset sales and structural adjustment, we will optimize and improve the allocation of loan resources.
Second, stepping on Lei Evergrande, asset quality has been implicated
Shengjing Bank's efforts in risk control and management over the past few years can be described as painstaking. As of the end of 2023, the bank's non-performing loan balance was 12.806 billion yuan, down 35.2% year-on-year; The non-performing loan ratio was 2.68%, down 0.54 percentage points year-on-year, and the provision coverage ratio was 159.5%, up 19.2% year-on-year.
In terms of numerical values alone, Shengjing Bank did deliver an answer sheet on the increase in risk offset capacity. However, comparing the main regulatory data of commercial banks in 2023, it can be seen that the average non-performing loan ratio of mainland commercial banks at the end of 2023 was 1.59%, and the provision coverage ratio was 205.14%, while none of the above indicators of Shengjing Bank reached the average level.
In addition, Shengjing Bank's core Tier 1 capital adequacy ratio, Tier 1 capital adequacy ratio and capital adequacy ratio as of the end of 2023 were 10.42%, 12.43% and 14.12%, respectively, an increase of 0.56, 2.57 and 2.60 percentage points, respectively, but only the Tier 1 capital adequacy ratio was higher than the industry average of 12.12%.
The reason why Shengjing Bank's asset quality has been mired in a quagmire for a long time is inseparable from its previous deep binding with Evergrande Group (HK: 03333). Evergrande Group acquired 1.002 billion shares and 2.2 billion domestic shares of Shengjing Bank in 2016 and 2019 respectively, with a shareholding ratio of 36.40% at one time, becoming the controlling shareholder of the bank.
Since then, Shengjing Bank has begun to provide frequent funds to Evergrande Group, providing loans of 32.595 billion yuan from 2020 to 2021 alone. It was also during this period that Shengjing Bank's non-performing loan ratio began to soar, nearly doubling from 1.71% in 2018 to 3.28% in 2021.
However, the good times did not last long, and Evergrande Group's financial situation began to deteriorate, and since September 2022, it has auctioned all its 1.282 billion domestic shares. However, despite the sale of part of its equity, the thunderous Evergrande failed to repay the 10 billion loan of Shengjing Bank in time, and the two repeatedly went to court and disputes continued.
On June 24, Evergrande Group added 3 pieces of information on the person subject to execution, with a total of 600 million yuan in the subject matter, all of which involved disputes over the recourse of bills related to Shengjing Bank. The judgment document website also shows that there are as many as 17,789 judicial cases related to Shengjing Bank, most of which involve financial loans, seizures, creditor's rights and other issues.
At present, Shenyang Shengjing Financial Holding Investment Group Co., Ltd. holds 20.79% of the shares of Shengjing Bank, making it its largest shareholder. However, according to the industry, the real estate industry is still the top three industries of the bank's loans, with a loan amount of 44.554 billion yuan in 2023, of which 979 million yuan is non-performing loans, with a non-performing ratio of 2.20%.
Obviously, Shengjing Bank is actively saving itself through asset structure optimization and non-performing risk disposal, but it will still take some time to completely get rid of the haze of asset quality after the Evergrande thunderstorm.
3. When the new management takes office, can it lead the turnaround?
At the beginning of 2024, Shengjing Bank, whose term of the seventh board of directors has expired, will start a new round of general election, which has attracted much attention from the market. The reason why the outside world has turned their attention to the new leadership team is that they can lead Shengjing Bank, which has unsatisfactory performance, to new development.
According to the voting results of the first extraordinary general meeting of shareholders in 2024, Sun Jin was elected as the chairman of the eighth board of directors of the bank, and his term of office will take effect from February 22 until the end of the term of the eighth board of directors. In addition, Shengjing Bank's lineup of executive directors also includes Liu Xu, Wang Yigong, Zhang Xuewen and He Yixuan.
It is worth noting that this election is only four months after the State Administration of Financial Supervision approved Sun Jin's qualifications as chairman of Shengjing Bank. The new leader had previously been at the Bank of China until April 2023, when he joined Shengjing Bank, where he was elected chairman four months later.
Prior to this, Shengjing Bank had already undergone a series of executive changes. Qiu Huofa, chairman and executive director of the bank, resigned in February 2023 due to his age, and he is a senior executive of Evergrande and serves as chairman of Evergrande Finance. Evergrande executives Zhu Jialin, Pan Darong, Ji Kun and others also resigned as non-executive directors of Shengjing Bank.
After Qiu Huofa's resignation, his duties were performed by Shen Guoyong, executive director and president of Shengjing Bank, but Shen Guoyong resigned two months later due to work adjustments. It was not until July 12 that the relevant departments approved the qualifications of Executive Director Liu Xu, and Shengjing Bank, which had no leader, waited for the first senior executive after the "huge earthquake" of the management.
Similar to Sun Jin, Liu Xu, who joined the company in 1990, worked at China Construction Bank for a long time until May 2022, when he joined Shengjing Bank. Liu Yan, the newly appointed shareholder supervisor and chairman of the board of supervisors of Shengjing Bank, has worked in the Shenyang Municipal Government of Liaoning Province for many years, and has served as secretary of the general office and deputy secretary general.
It is not difficult to see that a series of senior management changes of Shengjing Bank since 2023 revolve around the fundamental structural adjustment after the withdrawal of shareholder Evergrande Group. The bank also said that through the introduction of stronger state-owned and private strategic investment, the proportion of state-owned equity has been greatly increased, and Shengjing Bank has truly become a state-owned city commercial bank.
Only time will tell where this group of new management, with a background in state-owned enterprises, will lead Shengjing Bank, which spun off Evergrande Group, to go.