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Yangtze Business Daily News● Yangtze Business Daily reporter Xu Jia

The century-old Bank of Communications (601328.SH, 03328.HK) has become the biggest recipient of fines.

On August 2, the Hubei Supervision Bureau of the State Financial Supervision and Administration Bureau issued several fines. Due to multiple illegal and irregular behaviors such as failure to perform due diligence in online mortgage loan management and failure to perform due diligence in mortgage loan risk management, the Hubei Supervision Bureau of the State Financial Supervision and Administration Bureau fined the Hubei Branch of the Bank of Communications 4.9 million yuan, and 11 parties were warned or fined 50,000 yuan.

According to incomplete statistics from the Yangtze Business Daily, including this time, Bank of Communications and its subordinate branches and sub-branches have received a total of 34 regulatory fines this year, with a total fine amount of more than 25.84 million yuan.

As of the end of March 2024, the total assets of Bank of Communications were close to 14.24 trillion yuan, an increase of 1.26% from the end of the previous year. Among them, the balance of customer loans was 8.2 trillion yuan, an increase of 246.138 billion yuan from the end of the previous year, an increase of 3.09%.

As of the end of March 2024, the balance of non-performing loans of Bank of Communications was 108.377 billion yuan, an increase of 2.689 billion yuan from the end of the previous year, an increase of 2.54%; the non-performing loan ratio was 1.32%, a decrease of 0.01 percentage point from the end of the previous year.

Fined 4.9 million for multiple violations in loan business

On August 2, the Hubei Regulatory Bureau of the State Financial Supervision and Administration issued a number of fines, targeting a number of violations by the Bank of Communications.

The administrative penalty information disclosure form shows that the main illegal and irregular facts committed by the Hubei Branch of the Bank of Communications include failure to perform due diligence in the management of online mortgage loans, resulting in bad debts; failure to perform due diligence in the risk management of mortgage loans; failure to perform due diligence in the post-loan management of real estate development loans; failure to perform due diligence in the three loan checks, resulting in major losses; failure to perform due diligence in the risk management of commercial property loans; illegal issuance of M&A loans for equity investments; and serious violation of prudent business rules in internal control management.

In accordance with relevant regulations, the Hubei Regulatory Bureau of the State Financial Supervision and Administration imposed a fine of 4.9 million yuan on the Hubei Branch of the Bank of Communications. The date of the penalty decision was July 29, 2024.

Not only that, 11 parties including the President of Bank of Communications Hubei Branch, General Manager of Business Processing Center of Hubei Branch, General Manager of Credit Management Department of Hubei Branch, General Manager of Risk Management Department of Hubei Branch, Deputy General Manager of Operation Management Department of Hubei Branch (in charge of work), Deputy General Manager of Business Processing Center of Hubei Branch, employee of Business Processing Center of Hubei Branch, Deputy President of Hanyang Branch, and Customer Manager of Hanyang Branch were all warned, and many of them were fined 50,000 yuan.

A reporter from the Yangtze Business Daily found that the Bank of Communications has been fined several times this year. In January this year, the Bank of Communications Dezhou Branch, Kaifeng Branch, Zhenjiang Branch and other branches received a total of 12 regulatory fines, involving illegal and irregular facts such as failure to perform due diligence in the "three checks" of loans, failure to perform due diligence in post-loan management, and inadequate credit business management.

In April this year, Bank of Communications received eight fines for serious failure to perform due diligence before lending, illegal issuance of land reserve loans, and illegal issuance of project loans. In June this year, Bank of Communications received six regulatory fines.

According to incomplete statistics from a reporter from the Yangtze Business Daily, this year, Bank of Communications and its subordinate branches and sub-branches have received a total of 34 regulatory fines, with a total fine amount of more than 25.84 million yuan.

Loan credit impairment losses in the first quarter were 14.462 billion

As China's first national state-owned joint-stock commercial bank, Bank of Communications was founded in 1908 and officially opened to the public after reorganization in 1987. In May 2007, Bank of Communications was listed on the Shanghai Stock Exchange and in November 2023 it was selected as a global systemically important bank.

The Yangtze Business Daily reporter noted that the penalty imposed on Bank of Communications mainly involved the field of loan issuance. As of the end of March 2024, the total assets of Bank of Communications were close to 14.24 trillion yuan, an increase of 1.26% from the end of the previous year. The balance of customer loans was 8.2 trillion yuan, an increase of 246.138 billion yuan from the end of the previous year, an increase of 3.09%. Among them, the balance of corporate loans was 5.43 trillion yuan, an increase of 253.444 billion yuan from the end of the previous year, an increase of 4.89%; the balance of personal loans was 2.5 trillion yuan, an increase of 28.655 billion yuan from the end of the previous year, an increase of 1.16%.

In terms of credit asset quality, as of the end of March 2024, the balance of non-performing loans of Bank of Communications was 108.377 billion yuan, an increase of 2.689 billion yuan from the end of the previous year, an increase of 2.54%; the non-performing loan ratio was 1.32%, a decrease of 0.01 percentage point from the end of the previous year; the provision coverage ratio was 197.05%, an increase of 1.84 percentage points from the end of the previous year; the provision ratio was 2.60%, an increase of 0.01 percentage point from the end of the previous year.

However, in recent years, affected by factors such as the repricing of existing loans, adjustments to mortgage rates, and multiple reductions in the LPR, the yield on Bank of Communications' interest-earning assets has declined significantly, and the bank's net interest margin is facing downward pressure.

Data shows that in 2023, Bank of Communications achieved operating income of 257.595 billion yuan, a year-on-year increase of 0.31%; net profit attributable to parent company shareholders (net profit, the same below) was 92.728 billion yuan, a year-on-year increase of 0.68%.

During the reporting period, Bank of Communications' net interest income was 164.123 billion yuan, a year-on-year decrease of 5.759 billion yuan, a year-on-year decrease of 3.39%; the net interest margin was 1.14%, a year-on-year decrease of 23 basis points; the net interest yield was 1.28%, a year-on-year decrease of 20 basis points.

In the first quarter of this year, Bank of Communications realized a net interest income of 41.558 billion yuan, an increase of 910 million yuan or 2.24% year-on-year; accounting for 61.97% of operating income, an increase of 1.37 percentage points year-on-year. During the reporting period, the bank's net interest margin was 1.27%, a decrease of 6 basis points year-on-year.

In addition, in the first quarter of this year, Bank of Communications achieved net income from fees and commissions of 11.879 billion yuan, a year-on-year decrease of 806 million yuan, a decrease of 6.35%; it accounted for 17.71% of operating income, a year-on-year decrease of 1.20 percentage points. The main reasons include the "unified reporting of bank and insurance fees" and the reduction of the tail commission rate of equity fund products, etc., and the income from agency insurance and agency fund sales business decreased year-on-year; at the same time, fluctuations in inter-bank settlement business volume reduced inter-bank fee income, and the year-on-year decrease in credit card default rate reduced penalty income, and the overall income from bank card business decreased year-on-year.

Under the influence of the above factors, in the first quarter of this year, Bank of Communications achieved operating income of 67.059 billion yuan, a year-on-year decrease of 0.03%. However, with the reduction of business and management fees and asset impairment losses, the bank's net profit in the first quarter was 24.988 billion yuan, a year-on-year increase of 1.44%.

During the reporting period, Bank of Communications' business and management expenses were 19.613 billion yuan, a year-on-year decrease of 399 million yuan, a decrease of 1.99%; the cost-to-income ratio was 29.25%, a year-on-year decrease of 0.58 percentage points.

In the first quarter, Bank of Communications suffered asset impairment losses of 14.598 billion yuan, a year-on-year decrease of 872 million yuan, a decrease of 5.64%. Among them, loan credit impairment losses were 14.462 billion yuan, a year-on-year increase of 622 million yuan, an increase of 4.49%.