In the first half of this year, the capital adequacy ratio indicators of Chengdu Bank fell across the board compared with the end of the previous year, and capital needed to be replenished urgently. In addition, the proportion of real estate loans of the bank exceeds the regulatory "red line"
Fang Yue, a researcher at Investment Times
On September 30, Bank of Chengdu Co., Ltd. (hereinafter referred to as Bank of Chengdu, 601838.SH) announced that it had responded to the feedback on the public issuance of convertible bonds issued by the China Securities Regulatory Commission.
Previously, on September 18, the CSRC issued the Notice of Feedback on the Review of administrative licensing projects of the CSRC on the bank's public offering of A-share convertible corporate bonds. The issues covered in the feedback included 10 items such as administrative penalties, business risks, non-performing loan ratios, and the proportion of real estate loan balances in the reporting period of Chengdu Bank.
It is reported that The Bank of Chengdu intends to issue A-share convertible corporate bonds of no more than RMB8 billion, which will be used to supplement the core Tier 1 capital after the conversion.
The 2021 semi-annual report released by the Bank of Chengdu exposed two problems in the bank's operation.
First, the capital adequacy ratio indicator has declined across the board. As of the end of June this year, the bank's core Tier 1 capital adequacy ratio, Tier 1 capital adequacy ratio and capital adequacy ratio were 8.23%, 9.42% and 12.67% respectively, down 1.03 percentage points, 1.23 percentage points and 1.56 percentage points respectively from the end of 2020, and the core Tier 1 capital adequacy ratio continued to decline.
Second, the proportion of real estate loans is too high. In terms of real estate loans, the proportion of personal home loans and total real estate loans of Chengdu Bank exceeded the regulatory "red line" by 4.63 percentage points and 6.84 percentage points.
In addition, Chengdu Bank is also facing the problem of reducing the holdings of important shareholders. As of August 27, the shareholding ratio of Bohai Industrial Investment Fund Management Co., Ltd. (hereinafter referred to as Bohai Fund), the former third largest shareholder, decreased from 6.64% before the reduction to 1.00%. It is reported that the Bohai Fund plans to continue to reduce its holdings.
The three major shareholders reduced their holdings
According to public information, Bank of Chengdu was founded in December 1996 and listed on the Shanghai Stock Exchange on January 31, 2018, becoming the first listed bank in Sichuan Province and the eighth A-share listed city commercial bank in China. As of June 30, 2021, the bank's total assets reached 736.183 billion yuan and total liabilities were 688.405 billion yuan.
On August 27, Chengdu Bank issued the Announcement of the Results of Shareholders' Centralized Bidding to Reduce Shareholdings. According to the announcement, before the reduction, Bohai Fund held a total of 240 million shares of Chengdu Bank, accounting for 6.64% of the total share capital. The above-mentioned share sources are the shares held by Chengdu Bank before the initial public offering and listing, and the restriction was lifted on February 1, 2021. As of August 27, Bohai Fund has reduced its holdings by a total of about 204 million shares, accounting for 5.64% of the total share capital, through centralized bidding and block trading; Bohai Fund still holds about 36.1225 million shares of Chengdu Bank, accounting for 1.00% of the total share capital.
On the evening of August 30, The Bank of Chengdu issued the Announcement of the Shareholder Reduction Plan, which shows that bohai fund plans to further reduce its 1% equity holdings within three months after three trading days from the date of the announcement.
In addition, according to the semi-annual report of Chengdu Bank, as of June 30, 2021, among the top ten shareholders of the bank, Beijing Energy Group Co., Ltd. and Shanghai Dongchang Investment and Development Co., Ltd. have reduced their holdings by 8 million shares and 10.3263 million shares respectively.
For the shareholder reduction, the Bank of Chengdu told the Investment Times that the shares held by the above shareholders have been more than 10 years, and their reduction is a normal investment decision made according to their own capital needs, investment income requirements, stock price fluctuations and other situations.
Capital needs to be replenished
As of the end of June this year, the total amount of loans and advances issued by Chengdu Bank was 344.715 billion yuan, an increase of 60.648 billion yuan or 21.35% over the end of the previous year. With the expansion of the loan business, Chengdu Bank is facing the pressure of a decline in capital adequacy ratio.
According to the semi-annual report, as of the end of June 2021, the core Tier 1 capital adequacy ratio, Tier 1 capital adequacy ratio and capital adequacy ratio of Chengdu Bank were 8.23%, 9.42% and 12.67% respectively, which were 1.03 percentage points, 1.23 percentage points and 1.56 percentage points respectively compared with the end of 2020.
Looking at the annual report data of Chengdu Bank in recent years, the researchers of Investment Times noted that the core Tier 1 capital adequacy ratio of Chengdu Bank has declined continuously, from the end of 2018 to the end of 2020, which was 11.14%, 10.13% and 9.26% respectively.
Statistics show that at the end of the first half of 2021, the average capital adequacy ratios, Tier 1 capital adequacy ratios and core Tier 1 capital adequacy ratios of 57 listed banks were 13.68%, 11.12% and 9.89% respectively. It can be seen that the three indicators of Chengdu Bank are lower than the average level of listed banks.
For the decline in capital adequacy ratio, Chengdu Bank said that in the first half of 2021, the bank's total loans increased by 60.648 billion yuan from the end of the previous year, driving the growth of weighted risk assets. In terms of capital, after the cash dividend distribution, the growth rate of net capital is not as fast as the growth rate of weighted risk assets, resulting in a phased decline in the level of capital adequacy ratio.
On April 28 this year, The Bank of Chengdu issued the Announcement on the Preliminary Plan for the Public Issuance of A-share Convertible Corporate Bonds. On September 1, the bank announced that it had received approval from the Sichuan Regulatory Bureau of the China Banking and Insurance Regulatory Commission and was approved to publicly issue A-share convertible corporate bonds of up to RMB8 billion. On September 10, the bank disclosed that the public issuance of A-share convertible corporate bonds was accepted by the China Securities Regulatory Commission for administrative licensing. On September 18, the China Securities Association issued the "Notice of Feedback on the Review of the Administrative Licensing Project of the China Securities Regulatory Commission" on the above-mentioned issuance of convertible bonds, and the Bank of Chengdu has responded to the feedback.
It is reported that the funds raised by the Bank of Chengdu in this issuance of convertible bonds will be used to support the company's future business development after deducting the issuance fees, and will be used to supplement the company's core Tier 1 capital in accordance with relevant regulatory requirements after the conversion of convertible bond holders. The public offering of A-share convertible corporate bonds is subject to the approval of the China Securities Regulatory Commission.
"Our bank is making every effort to promote the relevant work of regulatory declaration and approval in accordance with relevant regulatory requirements, and will disclose the follow-up progress of this matter in a timely manner in accordance with regulatory requirements." The Bank of Chengdu said.
"Under the unified leadership and deployment of the party committee and the board of directors of the bank, our bank has made every effort to promote the development of various businesses, continuously accelerated the pace of reform and transformation, and maintained a restorative growth trend with the national provincial and municipal economies, and its operating performance has been stable and stable, and it has successfully achieved stable income and income, and maintained strong profit momentum." At the same time, we pay attention to the endogenous growth of capital, adhere to the basic management as the foundation of steady development, focus on the present, based on the long term, continue to improve the basic management capabilities, continuously optimize the capital structure, and improve the level of asset adequacy. The line further indicated.
Capital adequacy ratio indicator of Chengdu Bank
Source: Bank of Chengdu 2021 Semi-annual Report
The proportion of mortgages exceeds the "red line"
On January 1 this year, the management system of real estate loan concentration of banking financial institutions was implemented, and the proportion of real estate loans of commercial banks attracted much market and regulatory attention.
According to the semi-annual report, as of the end of June 2021, the balance of personal housing loans of Chengdu Bank was 76.271 billion yuan, accounting for 22.13% of the bank's total loans and advances, plus 24.885 billion yuan of loans invested in the real estate industry, and the total proportion of real estate loans reached 29.34%.
According to the Notice on Establishing a Management System for the Concentration of Real Estate Loans of Banking Financial Institutions (hereinafter referred to as the "Notice") issued by the Chinese Minmin Bank and the China Banking and Insurance Regulatory Commission, the upper limit of the balance of real estate loans and the upper limit of the balance of personal housing loans are required to be divided into five grades, and most urban commercial banks, including The Bank of Chengdu, are classified as the third grade, and the upper limits of the two indicators are 22.5% and 17.5% respectively.
It can be seen that the proportion of personal home purchase loans and real estate loans of Chengdu Bank exceeded the regulatory requirements by 4.63 percentage points and 6.84 percentage points respectively.
By combing through the annual report, the researchers of the Investment Times noted that the proportion of personal home loans in Chengdu Bank in the past two years has declined. From the data point of view, at the end of 2019, the balance of personal home loans of Chengdu Bank was 60.454 billion yuan, accounting for 26.07%; at the end of 2020, the balance of personal home loans was 73.020 billion yuan, accounting for 25.71%; as of the end of June this year, the proportion of personal home loans fell to 22.13%.
According to the requirements of the Notice, Chengdu Bank should reduce the proportion of real estate loans within four years to meet regulatory requirements. In this regard, the Bank of Chengdu said that in the past two years, the bank has significantly tightened the issuance of housing loans to individuals, and the increase in the first half of 2021 is the lowest point in seven quarters. At the same time, we will conscientiously study and actively study the "Notice" issued by the central bank and the Banking and Insurance Regulatory Commission, and do a good job in accordance with regulatory requirements to ensure the steady development of the business. In addition, we will make business plan arrangements, actively and steadily promote the adjustment of credit structure, adhere to the three major transformations of "digitalization, refinement and large retail", continue to adjust the loan structure, and promote the high-quality development of the bank's operations.