news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

【Introduction】Ping An Bank's 2024 mid-term performance meeting, President Ji Guangheng and several senior executives appeared and talked about the decline in revenue, the effectiveness of strategic reforms over the past year, dividend ratios, adjustments to high-risk credit business, real estate loans, changes in interest rate spreads, etc.

China Fund News reporter Liu Ming

On the morning of August 16, Ping An Bank held a 2024 mid-term performance conference. As always, Ping An Bank was the first to release its results. After releasing the first 2024 semi-annual report of a joint-stock bank the night before, it was also the first among joint-stock banks to hold a performance conference. Ji Guangheng, Party Secretary and President of Ping An Bank, who has been in office for a full year, appeared again with a group of senior executives and held a 2-hour performance sharing and Q&A exchange.

Photos of Ping An Bank meeting room taken by Liu Ming

At the meeting, those sitting on the rostrum with Ji Guangheng included Vice President and Chief Financial Officer Xiang Youzhi, Vice President Yang Zhiqun, Assistant President Zhang Zhaohui, Board Secretary Zhou Qiang, and Assistant President and Chief Risk Officer Wu Leiming.

This is the third time that Ji Guangheng has attended an earnings conference since taking office in June last year. Compared with the mid-term and annual earnings conferences in 2023, the first question Ji Guangheng was asked this time was about his work achievements in the first year in office, especially the strategic reforms that have attracted much attention in the industry since he took office. Ji Guangheng said, "This year has passed very quickly and it has been very hard," "The reforms have initially achieved some results," and "The bloated head office has disappeared, and a head office that unites and supports branches has appeared." He said that a lot of time had been spent on the demonstration and implementation of the structural reform. At present, the structural adjustment is basically in place, and the leadership team's main focus in the second quarter was on the operational level.

As for when the reform will pay off, Ji Guangheng said that the reform will not happen overnight, and the next two years will be the most difficult. He hopes to return to decent growth in 2026. Regarding the decline in revenue this year, Ji Guangheng said that the pain of retail transformation is very large, and the adjustment of high-risk credit loans has led to a sharp decline in scale and impacted revenue, but it has basically stabilized. The revenue decline in the first quarter was 14%, and the 13% decline in the first half of the year has narrowed. It is hoped that the decline in revenue for the whole year can be narrowed to about 10% or even lower. Regarding the interest rate spread, Ji Guangheng said that Ping An Bank must maintain its leading position among joint-stock banks.

Ping An Bank is determined to establish itself as a retail bank. It is also determined to transform its retail credit business, shifting the structure of retail loans from high-risk customers to medium-risk customers. Ji Guangheng said that all banks are targeting medium-risk customers and will win by relying on comprehensive service capabilities. Regarding the structural transformation, Ji Guangheng said frankly that if the absolute amount of high-risk credit assets has not bottomed out by the second half of next year, it will be a "complete failure" of the new leadership team.

Ping An Bank released its 2024 semi-annual report the night before the press conference. In the first half of 2024, Ping An Bank achieved operating income of 77.132 billion yuan, a year-on-year decrease of 13.0%; and achieved a net profit of 25.879 billion yuan, a year-on-year increase of 1.9%. Ping An Bank plans to distribute profits in the interim period of 2024, with a cash dividend of 2.46 yuan (including tax) per 10 shares, and a cash dividend of 4.774 billion yuan (including tax).

It is worth noting that after the annual dividend ratio in 2023 was significantly increased from about 12% in the past to 30%, Ping An Bank launched a mid-term dividend for the first time, with a dividend ratio of 18.4%. Ji Guangheng said that there is room for a half-year dividend of about 18%, and by the end of the year, they will "do their best and act within their means."

After Ping An Bank disclosed its semi-annual report and dividend plan, its share price rose 1% on August 16, closing at 10.13 yuan, with a total market value of 196.6 billion yuan.

1. Ji Guangheng talks about the reforms over the past year: There have been some initial results. He hopes that the decline in revenue this year will be narrowed to 10% or even lower, and that "decent" growth will return in 2026

After a year in office, Ji Guangheng said that this year has indeed been very fast and very hard. For a bank, one year is a very short time, especially when the external environment changes significantly. It will take three to five years to run a bank well, but one year is enough to ruin it.

Ji Guangheng said that the most important work this year was structural reform, team changes, linkage between the head office and branches, and large-scale streamlining and adjustment of cadres, which have basically been resolved. The reform has achieved some initial results, but it will take time and will not be achieved overnight. Ji Guangheng said that a lot of time was spent on structural adjustments before, and starting from the second quarter of this year, the leadership team has focused its main energy on operations.

After more than a year of reform, Ji Guangheng said, "The particularly bloated head offices have basically disappeared, and a head office that is very united and very supportive of branches has emerged." The phenomenon of silo management between departments has been reduced, and there have been great changes in coordination between departments.

As for when the reform will have a significant effect, Ji Guangheng said that the most difficult period will be this year and next year, especially this year. It is hoped that by next year, the risks of retail credit loans will be basically resolved, and other business sectors will rebound. It is hoped that a relatively "decent" growth will be returned in 2026. From this year to the middle of next year, Ping An Bank's revenue performance may not be ideal, but profits will still be basically stable, which depends on the reduction of risk loss and cost control.

As for the decline in revenue this year, Ji Guangheng said that the year-on-year decline in revenue in the first half of this year was 13%, which was narrower than the 14% decline in the first quarter. He hoped that the annual decline would be around 10% or lower, so that there would be more room for maneuver next year.

2. Firmly adhere to the retail banking strategy and transform the retail loan strategy. If the high-risk scale does not bottom out by the end of next year, it will be a "complete failure" of the new leadership team.

Ping An Bank's revenue decline is largely due to the substantial reduction in the scale of high-risk retail credit, and the scale structure needs to be adjusted and transformed from high-risk to medium-risk. During this process, Ping An Bank's retail banking strategic goal has not changed. In the words of Ping An Bank executives, it is "unwavering."

Ping An Bank's strategic goal is to be "China's most outstanding and world-leading intelligent retail bank", and its strategic policy is to "strengthen retail, refine corporate banking, and specialize in peers", both of which reflect the strategic importance of retail to Ping An Bank.

Ji Guangheng said that the retail business will be strengthened and the retail business will be established. If Ping An Bank eventually becomes a wholesale bank, its characteristics will be gone and it will no longer be recognized by the market. Ji Guangheng said that Ping An Bank's corporate business was relatively weak in the past, but now it is recovering and growing, and in an uncertain economic environment, it will help the business survive the cycle.

Ji Guangheng said that high-interest financial business mainly refers to credit loans. Ping An Bank's relatively large credit loan product "Xinyidai" has been reduced from 150 billion yuan to about 40 billion yuan. Overall, the absolute amount of high-risk loan assets has dropped and will basically bottom out next year.

Ji Guangheng said, "If the scale of high-risk credit loans has not bottomed out by the second half of next year, or if newly issued loans cause trouble again, it will be a complete failure of the new leadership team."

Ping An Bank's retail business needs to be adjusted from high-risk to medium-risk. Ji Guangheng said that many banks will focus on the target market of medium-risk customers, which will test the comprehensive service capabilities of each bank.

Assistant President Zhang Zhaohui further stated that the breakthroughs in the retail strategy adjustment mainly lie in the development of medium-risk and medium-high-risk customer groups and products, as well as the establishment of self-operated channels, and the strengthening of management and re-selection of external intermediary institutions. In this regard, the advantages of Ping An Bank and Ping An Group are now combined in three aspects: the first is channel management, changing the past intermediary channel acquisition, building Ping An Bank's self-operated channels and Ping An Group's comprehensive development channels, and gradually strengthening intermediary channel management; the second is digital risk drive, targeted customer group analysis and risk strategy; the third is customer group management.

On the retail wealth side, Zhang Zhaohui said that Ping An Bank has changed its past AUM (asset size under management) growth strategy model of "three highs". In the past, it relied on high-priced, high-risk products on the loan side and high-yield products on the deposit side to acquire customers. This model is currently facing some challenges, such as the lack of high-priced assets. Second, there were more equity products in the past. In the future, in line with the development of the situation, we will increase our efforts to develop closed and stable products.

Zhang Chaohui said that by next year, Ping An Bank's overall deposit interest rate will be better reflected and its scale will continue to grow.

3. Talking about the dividend ratio: 18% in half a year is "leaving room for maneuver", and by the end of the year we will "do our best and do what we can"

The interim dividend was proposed for the first time, and the dividend ratio has attracted attention. Ji Guangheng said that Ping An Bank's capital adequacy ratio is stable, and the net profit can also be maintained stable at present. There is also a desire for dividends and market pressure, and supervision also encourages dividends. The semi-annual dividend ratio of 18% is relatively conservative, and by the end of the year, it will "do its best and act within its means."

Ji Guangheng said that in the current difficult times, high-dividend assets are very important to many investors, especially investment managers.

Xiang Youzhi, the vice president and chief financial officer, also said that from the perspective of the first half of the year, there is still "room for maneuver." Zhou Qiang, secretary to the board, added that dividends are an issue that investors are most concerned about, but the 18% in the interim report does not mean that the annual report is 18%; the interim report is more of an attitude, and it also leaves some room for the annual report dividend.

4. The interest rate spread cannot go down indefinitely. Ping An Bank’s interest rate spread must be stabilized at the forefront of its peers.

Regarding the long-term concern and downward trend of bank interest margins, Ji Guangheng said that interest rates will definitely go down, and interest margins must be stable above a certain reasonable level and cannot go down indefinitely. Without a basic interest margin, it will have an impact on the systemic security of banks, because interest income is a very important proportion of bank revenue.

Regarding Ping An Bank's interest margin, Ji Guangheng said that it would be good if it could maintain 1.8% or 1.9% in one or two years, but it is difficult to answer after three or five years. However, Ping An Bank must remain at the forefront among joint-stock banks, and its non-performing loan ratio, provision coverage ratio, and interest margin level must be stabilized at the forefront of the industry, and the future will be better overall.

5. The quality of real estate loans is better than that of peers. There is pressure for non-performing loans, but it is generally controllable. We will definitely increase support for real estate.

As of the end of June 2024, Ping An Bank's corporate real estate loan balance was 258.715 billion yuan, of which real estate development loans were 84.214 billion yuan, and operating property loans, mergers and acquisitions loans and others totaled 174.501 billion yuan. The non-performing rate of corporate real estate loans was 1.26%, up 0.40 percentage points from the end of the previous year. Ping An Bank said that it was mainly due to the external environment and the tight funding of some real estate companies, but the overall non-performing rate was still at a low level.

Wu Leiming, assistant president and chief risk officer, said that due to the downturn in the real estate industry, the capital chain of many real estate companies is relatively tight. The non-performing rate of real estate loans is still relatively high overall, and Ping An Bank's non-performing rate is lower than the industry average.

Wu Leiming said that Ping An Bank's development loans are about 80 billion yuan, mainly concentrated in first- and second-tier cities. Due to strict project management and cash flow control, the overall asset quality performance is still good. Operating property loans are more than 170 billion yuan, mainly office buildings, shopping malls and other property loans. At present, both the occupancy rate and the rental level are greatly affected, and future pressure will still exist. But compared with its peers, Ping An Bank's asset quality will be better.

Regarding real estate industry loans, Wu Leiming said that real estate has always been Ping An Bank's main sector, and it will definitely increase its support and investment in real estate. In addition, Ping An Bank has actively participated in many national policies. In terms of investment support for real estate companies on the white list, it has always been at the forefront among banks, and will meet the reasonable needs of enterprises of different ownership structures equally.

Editor: Xiaomo

Review: Xu Wen

Copyright Notice

"China Fund News" enjoys the copyright to the original content published on this platform. Reproduction without authorization is prohibited, otherwise legal liability will be pursued.

Contact person for authorized reprint cooperation: Mr. Yu (Tel: 0755-82468670)