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Produced by | Bullet Finance

Author | Lili

Editor | Dan Zong

Art Editor | Qianqian

Review | Songwen

Another deputy president of Changshu Bank, an A-share listed rural commercial bank, has changed.

Recently, the bank's vice president Wu Tiejun resigned and was replaced by Cheng Pengfei, who is almost born in the 1980s. Prior to this, the positions of Changshu Bank's generals and commanders took office on the same day after being vacant for more than half a year, with the regulator approving the qualifications of Chairman Xue Wen and President Bao Jian.

Since the second half of last year, Changshu Bank has undergone a major reshuffle of its management, with a clear trend towards a younger leadership team.

Changshu Bank, founded in 2001, is one of the first batch of joint-stock rural financial institutions in China. It was restructured from Changshu Rural Credit Cooperative Union and was the first rural small and medium-sized financial institution in China to successfully introduce strategic investors. In September 2016, Changshu Bank was listed on the Shanghai Stock Exchange.

In terms of performance, although Changshu Bank's revenue and net profit both increased, the growth rates have slowed down, the net interest margin has continued to narrow, and the dividend ratio has been less than 30% for three consecutive years... There are still many challenges facing the new leadership team.

1. The top management continued to change the formation, and the generals and commanders were approved on the same day

On July 31, Changshu Bank issued an announcement on the resignation of Vice President Wu Tiejun and the resolution of the fifth meeting of the eighth board of directors.

The announcement showed that Wu Tiejun resigned from the position of vice president of the bank due to work transfer; the fifth meeting of the eighth board of directors passed the proposal to appoint Cheng Pengfei as vice president.

(Photo/Changshu Bank Announcement)

According to his resume, Cheng Pengfei was born in July 1979 and has served as a teller at Changshu Bank Zhaoshi Branch, assistant general manager of the financial market department, general manager of the asset management department, vice president of the fund operation center and general manager of the transaction banking department, and president of Dayi Branch. He is currently a member of the bank's party committee, president of the fund operation center and general manager of the transaction banking department.

Last year, there were intensive personnel adjustments in the banking system of Jiangsu Province, and Changshu Bank was among them.

At the end of 2023, after the former chairman of Changshu Bank, Zhuang Guangqiang stepped down, he went to Jiangnan Rural Commercial Bank to serve as chairman; President Xue Wen took over from Zhuang Guangqiang as chairman; and Jiangnan Rural Commercial Bank Vice President Bao Jian went to Changshu Bank to serve as president.

On July 23, Changshu Bank issued an announcement that the bank had received the "Approval from the Suzhou Regulatory Bureau of the State Financial Supervision and Administration on Xue Wen's Qualifications" and the "Approval from the Suzhou Regulatory Bureau of the State Financial Supervision and Administration on Bao Jian's Qualifications", approving Xue Wen's qualifications as the chairman of the bank and Bao Jian's qualifications as the president of the bank.

Public information shows that Xue Wen and Bao Jian are both veterans of Changshu Bank.

Chairman Xue Wen was born in March 1974. He has served as clerk of Xieqiao Credit Union in Changshu City, clerk of Xieqiao Branch of Changshu Bank, assistant president and vice president (in charge of work) of Xieqiao Branch and Development Zone Branch, president of Xieqiao Branch and China Merchants Branch, vice president of Lianyungang Oriental Rural Commercial Bank, member of the Party Committee, vice president, financial director, deputy secretary of the Party Committee and president of Changshu Bank.

For Changshu Bank, President Bao Jianzhi represents a kind of "return".

Bao Jian, born in 1981, started as a branch teller and gradually moved up to management positions: he served as a teller at Changshu Bank's Renyang Branch, deputy general manager of the Investment Banking and Interbank Department of Nanjing Bank's Suzhou Branch, general manager of the Investment Banking Department of Changshu Bank, member of the Party Committee and vice president of Changshu Bank, member of the Party Committee and vice president of Jiangnan Rural Commercial Bank, and other positions.

According to "Jiemian News·Bullet Finance", since the second half of 2023, there have been frequent changes in the senior management of Changshu Bank.

In June 2023, the bank's vice president and chief financial officer Yin Xianzhu resigned due to work transfer, and chairman of the supervisor Huang Yongbin resigned due to age reasons.

On November 13, 2023, Changshu Bank issued an announcement stating that Chairman Zhuang Guangqiang and Vice President Fu Jin resigned due to work transfer. President Xue Wen took over the position of chairman after his resignation. At the same time, Bao Jian was appointed as president and Gan Qing as vice president.

After this round of executive changes that lasted for a year, there is a clear trend of younger executives at Changshu Bank.

Currently, the bank has a "one president and four vice presidents": President Bao Jian, Vice Presidents Lu Dingchang, Li Yong, Gan Qing, Cheng Pengfei. Bao Jian and Gan Qing were both born in the 1980s, and Cheng Pengfei's qualifications are still subject to regulatory approval.

2. Total assets exceeded 360 billion, and performance growth slowed down

The transition between the old and new teams has been completed, but the test for the "successor" has just begun.

The first quarter financial report of 2024 shows that Changshu Bank achieved total operating income of 2.70 billion yuan, a year-on-year increase of 12.01%, and net profit of 952 million yuan, a year-on-year increase of 19.80%. As of the end of the period, total assets were 364.676 billion yuan, an increase of 9.04% from the end of the previous year.

Changshu Bank's revenue and net profit both continued to grow last year. In 2023, Changshu Bank achieved operating income of 9.87 billion yuan, a year-on-year increase of 12.05%; net profit attributable to shareholders of the parent company was 3.282 billion yuan, a year-on-year increase of 19.60%.

However, it is worth noting that the growth rates of revenue and net profit have slowed down compared with the previous two years.

Annual report data from previous years show that in 2021 and 2022, Changshu Bank's revenue growth rate was 16.31% and 15.07% respectively; the net profit growth rate also declined for the first time in 2023, with the net profit growth rate in 2021 and 2022 being 25.02% and 19.83% respectively.

Specifically, Changshu Bank's revenue consists of two parts: net interest income and net non-interest income.

In 2023, Changshu Bank's net interest income will be 8.501 billion yuan, a year-on-year increase of 11.69%, a decrease of 2.06 percentage points from 13.75% in 2022. Net non-interest income will be 1.369 billion yuan, a year-on-year increase of 14.34%, a decrease of 9.85 percentage points from 24.19% in 2022.

In addition, the net income from fees and commissions in non-interest net income in 2023 was approximately RMB 32 million, a significant decrease of 82.84% compared to RMB 188 million in 2022.

Among them, the fee and commission income was approximately 270 million yuan, a decrease of 30.64% compared with 389 million yuan in 2022; the fee and commission expenditure was approximately 238 million yuan, an increase of 18.04% compared with 202 million yuan in 2022.

(Photo/Changshu Bank Annual Report)

Xue Wen, chairman of Changshu Bank, said at the performance briefing: "In 2023, our bank's net income from fees and commissions decreased year-on-year, mainly due to the decline in the scale of our proprietary wealth management and the decline in the fee rate after the transformation of wealth management to net value, which led to a decline in our wealth management income."

The net interest margin is the interest rate difference between bank deposits and loans. The net interest margin reflects the profitability of the bank and is an important indicator for measuring the performance of commercial banks.

The annual report shows that Changshu Bank's net interest margin fell below 3% to 2.86% in 2023. The bank's net interest margin has continued to narrow over the past four years, with net interest margins of 3.18%, 3.06% and 3.02% in 2020-2022 respectively.

In February this year, an investor asked questions about the interest rate spread. Changshu Bank stated that in recent years, it has optimized the loan structure through downward, smaller, credit-oriented, and biased methods, and the loan price is still in a downward channel. The bank has increased the proportion of high-interest loans and improved the deposit interest rate level by lowering deposit prices and optimizing the structure. It is expected that the interest rate spread will remain relatively stable in 2024.

However, the first quarter financial report of 2024 showed that there was no sign of improvement in Changshu Bank's net interest margin, which continued to narrow to 2.83%.

3. Hidden concerns behind low dividend ratio

Dividends are an important way for listed companies to give back to shareholders. In 2024, listed banks have set off a "wave" of mid-term dividends.

Among the listed banks with large branches, Changshu Bank is relatively "low-key". This is the third consecutive year that Changshu Bank's dividend ratio has been below 30%.

In Changshu Bank's 2023 profit distribution plan, a cash dividend of RMB 2.50 (tax inclusive) will be distributed for every 10 shares, and one additional share will be issued to all shareholders for every 10 shares from capital reserves. The cash dividend is RMB 685 million, which is basically the same as the cash dividend amount in 2022.

However, Changshu Bank's net profit attributable to shareholders of the parent company increased by nearly 20% in 2023, which resulted in the same proportion of cash dividends accounting for 20.88% of the net profit attributable to shareholders of the parent company in 2023, which was lower than the cash dividend ratio of 24.97% in 2022 and lower than 25.05% in 2021.

(Photo/Changshu Bank Annual Report)

According to the "Guidelines on Cash Dividends of Listed Companies", if a listed company is profitable during the annual reporting period and its accumulated undistributed profits are positive, and no cash dividends are paid or the ratio of the total amount of cash dividends to be distributed to the net profit attributable to the shareholders of the listed company in that year is lower than 30%, the company shall explain the reasons.

Changshu Bank said that the reduction in the dividend ratio was mainly based on three considerations:

1. The bank is in a stage of rapid development and should appropriately retain profits to supplement core tier-one capital and ensure the continuous replenishment of endogenous capital;

2. Provide investors with better and more reasonable long-term returns;

3. Comply with the trend of stricter capital supervision and further enhance risk resistance capabilities.

As of the end of 2023, Changshu Bank's capital adequacy ratio, Tier 1 capital adequacy ratio and core Tier 1 capital adequacy ratio were 13.86%, 10.48% and 10.42%, respectively, all far higher than the benchmark standards of 7.50%, 8.50% and 10.50%, and changed by -0.01, 0.21 and 0.21 percentage points respectively from the end of the previous year.

In addition, "Jiemian News·Bullet Finance" noticed that in terms of asset quality, Changshu Bank's non-performing loans "decreased while rising".

As of the end of 2023, Changshu Bank's non-performing loan ratio was 0.75%, down 0.06 percentage points from the beginning of the year. However, non-performing loans were 1.672 billion yuan, up 103 million yuan from 1.569 billion yuan in 2022.

Generally speaking, commercial banks classify loan quality into five levels based on the borrower's actual repayment ability, that is, loans are divided into five categories according to the degree of risk: normal, special mention, substandard, doubtful, and loss, with the last three being non-performing loans.

In addition to non-performing loans, loans under watch were 2.611 billion yuan, a significant increase from 1.625 billion yuan in 2022; the ratio of total loans also increased by 0.33 percentage points. Changshu Bank's non-performing loans are facing upward risk pressure.

(Photo/Changshu Bank Annual Report)

The annual report shows that Changshu Bank is currently focusing on retail banking, corporate banking, financial market business, and rural banking business. Among them, rural banking is one of the characteristics of Changshu Bank's business.

Changshu Bank stated in its 2023 annual report that it has actively and steadily promoted the acquisition and merger of village banks, and currently has 31 holding and equity-holding enterprises. As of the end of the reporting period, the total assets of village banks were 52.959 billion yuan, an increase of 18.87%; total deposits were 43.971 billion yuan, an increase of 23.61%; and total loans were 41.610 billion yuan, an increase of 17.19%.

However, in terms of asset quality, the non-performing loan ratio of Changshu Bank's rural banks was 0.97%, down 0.01 percentage point from the beginning of the year; the provision coverage ratio was 339.72%, up 27.10 percentage points from the beginning of the year.

Compared with Changshu Bank's non-performing loan ratio of 0.75% and provision coverage ratio of 537.88%, the asset quality of village bank business is obviously lower than the overall level of the bank.

Regarding this year's operating goals, Changshu Bank stated that it would focus on the "three rural issues and two small businesses" and continue to promote light capital, digitalization, integration and ecological construction.

At present, the interest rate spread between deposits and loans is narrowing, credit risks are exposed, and rural financial institutions need to achieve high-quality development... Next, whether Changshu Bank can uphold the exploratory spirit of "daring to venture, dare to try, and dare to act" and reach a new level remains to be answered by the new management.

*The title image in the article comes from: Photo Network, based on VRF protocol.