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A year ago, Ji Guangheng appeared for the first time as Party Secretary at Ping An Bank's 2023 mid-year performance conference. Since then, Ping An Bank has ushered in a series of strategic adjustments to its organizational structure and retail and corporate businesses.

A year later, Ping An Bank's 2024 mid-year performance conference arrived as scheduled. On August 16, Ji Guangheng, as the Party Secretary and President, and a group of Ping An Bank executives attended the 2024 mid-year performance conference to review the results of the strategic reforms over the past year.

"It is very difficult to run a bank well without 3 to 5 years of operation. If you want to ruin a bank, one year is enough." Ji Guangheng said frankly that the strategic reform is the most difficult this year. Judging from the overall progress so far, this round of reform has achieved the original expectations.

This year, Ping An Bank's head office-level structural adjustments, team changes, head office and branch linkage, cadre rejuvenation, competitive recruitment, etc. have all been implemented. The retail transformation is basically stable and the corporate business is supplemented. However, the management still needs to face the revenue pressure. In the first half of 2024, Ping An Bank continued to "increase profits but not revenues". Although the decline in operating income narrowed compared with the first quarter, it was still "unsatisfactory", and the decline remained at a high level of 13%. Ji Guangheng pointed out that by reducing risk and loss reduction and increasing cost control, he hopes to narrow the annual revenue decline to 10% and maintain profit growth.

“This year is the most difficult year for reform”

Last August, when Ji Guangheng attended Ping An Bank's performance conference for the first time, he said that he would combine the external environment with his own development requirements and "continuously carry out gradual self-correction and spiral iterative upgrades" on the basis of the overall strategy. Since then, Ping An Bank has carried out a series of reforms, including organizational structure adjustment and reduction of high-risk retail business.

At the 2024 mid-year results conference, Ji Guangheng stated that for a bank, one year is a very short time, especially when the external environment changes significantly. It would be very difficult for a bank to operate well without 3-5 years. Of course, if a bank wants to mess things up, one year is enough.

Looking back at the strategic reform achievements of the past year, Ji Guangheng introduced that, in general, the particularly bloated head office has basically disappeared. This year, Ping An Bank has completed the structural adjustment at the head office level, and the basic structure of the branches has also been in place. Overall, team changes, head office and branch linkage, young cadres, and competitive recruitment have all been implemented. In the second quarter of this year, the main focus was on operations. The biggest pressure this year was on retail business. High-risk credit products had a huge impact on revenue. Ping An Bank adjusted its high-risk business and increased the construction of self-operated channels. The supplementary corporate business has played a role in covering and replacing. Corporate loan deposits are among the best in joint-stock banks, and asset quality remains basically stable.

"My team and I have worked really hard this year. There are a lot of uncertainties every day. We have to maintain growth and resolve legacy issues, but we have a good grasp of priorities," Ji Guangheng admitted.

Although the strategic reform has achieved initial results, the pressure is still great. In the first half of 2024, Ping An Bank continued its performance in the first quarter, and the situation of "increasing profits but not increasing revenues" has not been alleviated. During the reporting period, the bank achieved operating income of 77.132 billion yuan, a year-on-year decrease of 13%; and achieved a net profit of 25.879 billion yuan, a year-on-year increase of 1.9%.

"One of the main sources of pressure is the decline in revenue," said Ji Guangheng. The revenue decline was too fast. Although the decline was narrower than 14% in the first quarter, it was still "not ideal." The reduction of high-risk retail business had an impact on revenue. It is expected that revenue may not be ideal from this year to next year. In the future, by reducing risks and losses and increasing cost control, it is hoped that the annual revenue decline will be narrowed to 10%, and profit growth will be maintained by increasing revenue and reducing expenditure.

"The most difficult part of the reform is this year. I hope that by next year the retail problem can be basically solved, and other business segments can come up, so that we can get back on track in 2026 and achieve relatively decent growth," said Ji Guangheng.

“The pain of retail is very great”

Since the retail transformation plan was proposed in the second half of 2016, Ping An Bank has achieved remarkable results in the development of its retail business and has been dubbed the "New King of Retail" by the market. However, in the context of adjusting the loan business structure and reducing high-risk retail business, Ping An Bank's retail loan growth has been relatively weak.

As of the end of June 2024, Ping An Bank's personal loan balance was 1.82 trillion yuan, down 7.9% from the end of the previous year, of which mortgage loans accounted for 60.6%. Among the above personal loans, except for the housing mortgage loan balance which increased by 1% from the end of the previous year, the balances of credit card receivables, consumer loans, and operating loans all decreased from the end of the previous year. The balance of credit card receivables was 470.999 billion yuan, down 8.4% from the end of the previous year; the balance of consumer loans was 488.478 billion yuan, down 10.4% from the end of the previous year; and the balance of operating loans was 555.282 billion yuan, down 9.7% from the end of the previous year.

"The retail sales pain was very great this year, with a decrease of 150 billion yuan in high-risk credit products, which had a huge impact on revenue," said Ji Guangheng. Since 2023, Ping An Bank has been reducing high-risk credit products. The period was very painful, and when revenue dropped very quickly, there were also internal considerations on whether to continue to make some high-risk products, but in the end it resisted the temptation.

"Our biggest pressure comes from retail, and the main pressure from retail comes from risk. The biggest risk comes from the fact that we did not have our own channels in the past and had more external channels." Ji Guangheng said that with the deepening of reform, the retail business is currently basically stable, loans have improved from a rapid decline to stabilization, and self-operated channels have also increased.

Strengthening the retail business is the core strategy of Ping An Bank. Regarding the focus of subsequent retail reforms, Zhang Zhaohui, assistant president of Ping An Bank, said that the main breakthrough in the retail reform strategy is on the loan side. The breakthroughs on the loan side are mainly in medium-risk and medium-high-risk customer groups, compression of intermediary customer acquisition and establishment of self-operated channels, data risk-driven, and customer group-based operations.

Zhang Zhaohui introduced that Ping An Bank had started to plan and arrange at the beginning of this year. On the one hand, it focused on cornerstone customer products, such as housing mortgage loans and white-collar loans; on the other hand, it focused on breaking through products for medium-risk and medium-to-high-risk customers, mainly focusing on providing downstream distributors of well-known brands of clothing, food, housing and transportation with flexible financial service tools and loan products that meet the needs of salaried workers, individual business owners, and small and micro enterprises, so as to meet the temporary working capital needs of this type of customer base.

"In the past, Ping An Bank has relatively rich experience in business accumulation, especially in risk data accumulation, and its risk model is also being further improved. In the future, when applying it in the two customer scenarios of medium-risk and medium-high-risk customers, Ping An Bank will focus on comprehensive returns, including loan returns, deposit returns, etc." Zhang Zhaohui added.

Jinle Function Analyst Liao Hekai pointed out that Ping An Bank's business structure is continuously being adjusted, and its willingness to expand is not strong. With the focus on strengthening risk control, increasing revenue and reducing expenditure, and strengthening operations to improve profit levels, Ping An Bank continues to reduce high-risk and high-yield business directions. The proportion of personal loan interest income is still high. The decline in this business is the main reason for the decline in operating data. It is expected that Ping An Bank's retail business will adopt the strategy of reducing high-risk products in the next step, and continue to promote business structure adjustments to re-arrange the bank's loan placement, further focus on key customers, and segment the track. By focusing on medium-risk and medium-to-high-risk customer groups, optimizing risk models, and improving comprehensive returns, Ping An Bank can further expand its business scope and improve profitability. This is both a pragmatic choice and a necessary choice for refinement and strengthening.

Corporate business "filling the gap"

During the painful period of retail business development, Ji Guangheng once expressed the hope that the corporate business could hold up and provide retail with a chance to breathe.

At the 2024 mid-year results conference, Ji Guangheng reiterated that Ping An Bank's strategy of strengthening retail or establishing retail business has not changed, but in times of economic uncertainty, it is necessary to support the corporate business that has been less developed in the past and enable it to achieve restorative growth.

Against the backdrop of slowing retail growth, the growth of corporate deposits and loans in the first half of 2024 became an important driving force for Ping An Bank's growth. As of the end of June 2024, the bank's corporate loan balance increased by 11.4% to 1.59 trillion yuan from the end of the previous year; the corporate deposit balance was 2.28 trillion yuan, an increase of 3.7% from the end of the previous year.

"Corporate business has played a very important role in providing a cover and substitution this year. Corporate loans and deposits are among the best in joint-stock banks. During the investment process, the asset quality has remained basically stable," said Ji Guangheng.

Looking back at the public loan issuance, Yang Zhiqun, Vice President of Ping An Bank, said that Ping An Bank focuses on strategic customers and high-quality regional enterprises, and attaches equal importance to efficiency and safety. Loans mainly flow to three major areas: infrastructure and public utilities, manufacturing, and wholesale and retail, which together account for about 70% of the issuance ratio. In the first half of this year, the number of loan holders increased by 15.5% compared with the beginning of the year, further consolidating the customer base for loan asset issuance.

"The reasons for the growth of Ping An Bank's credit include the company's restorative growth, the continuous optimization of corporate asset quality and risk control system, the improvement of asset acquisition capabilities brought about by the growth of the team, and the increase in corporate resource allocation caused by the phased adjustment of retail business this year." Yang Zhiqun said that in the next stage, Ping An Bank will continue to maintain the trend of steady growth in asset investment, focusing on stabilizing the basic plate of traditional advantageous fields such as wholesale and retail, infrastructure, and at the same time increase investment in manufacturing to improve the industry average. In addition, it will also strengthen the promotion of advantageous products such as cross-border finance and supply chain finance, deepen cooperation with key customers, and do its best to provide financial services to listed companies, scientific and technological enterprises, inclusive finance and strategic customers, especially to strengthen support for small and micro enterprises.

Liao Hekai believes that Ping An Bank insists on increasing its corporate loan issuance, is guided by serving the real economy, focuses on five aspects: industrial finance, technology finance, supply chain finance, cross-border finance, and inclusive finance, and continues to increase financing support for key areas such as manufacturing, specialized and new industries, private enterprises, small and medium-sized enterprises, etc. This is a return to the essence of banking business and will help the long-term development of Ping An Bank.

From the organizational structure to the adjustment of the distribution of retail and corporate business, Ji Guangheng concluded: "Reform is never achieved overnight or in one stroke. Ping An Bank will pay close attention to policy orientation and market changes, and make continuous adjustments and corrections based on the periodic feedback during the reform process, advance in depth, and improve the overall management level with performance as the guide."

Wang Hongying, president of the China (Hong Kong) Financial Derivatives Investment Research Institute, believes that the reason why Ping An Bank fell into a situation of stagnant growth was directly related to its high-risk business strategy. Through the adjustment of business strategy, especially the enhancement of digital and technological levels, further risk prevention, and the continuous improvement of new retail business, the development of corporate business will be further strengthened, thus forming a new model of high-quality comprehensive financial development.

Beijing Business Daily reporter Li Haiyan