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recently, shengjing bank, the largest city commercial bank in northeast china, submitted a less-than-ideal report card.

founded in 1997, shengjing bank was formerly shenyang city commercial bank. after the restructuring was completed in 2007, it was renamed shengjing bank and successfully listed on the hong kong stock exchange in 2014.

after going public, evergrande, the former real estate giant, gradually became the controlling shareholder of shengjing bank. with the collapse of evergrande and the continuous increase in holdings by shenyang state-owned assets, shengjing bank gradually completed the de-evergrandeization of its equity.

however, it will take time for evergrande's "sequelae" to completely disappear. the interim report shows that shengjing bank's total assets are 1,068.3 billion yuan (rmb, the same below), a decrease of 11.748 billion yuan from the end of 2023; operating income fell by 36.2% and net profit fell by 25.1%.

whether judging from its performance or the reaction of the capital market, shengjing bank still has a long way to go if it wants to achieve true "transformation".

1

total assets shrank.

revenue and profit both declined

the interim report shows that in the first half of 2024, shengjing bank's main business grew steadily.

as of june 30, 2024, total deposits were rmb 779.277 billion, an increase of 2.4%; total loans were rmb 492.708 billion, an increase of 3.1%; loans accounted for 46.1% of total assets, an increase of 1.8 percentage points from the end of last year.

however, the interim report also showed that the bank's total assets were shrinking more and more obviously.

as of june 30, 2024, shengjing bank's total assets were 1,068.305 billion yuan, a decrease of 11.748 billion yuan from the end of the previous year. at the end of 2023, the bank's total assets were 1,080.053 billion yuan, a decrease of 2.36 billion yuan from the same period in 2022. looking at the long-term trend, shengjing bank's total assets have been hovering above one trillion yuan in recent years, and there has been no major breakthrough.

due to the combined influence of factors such as lpr reduction, low market interest rates, and business structure adjustments, shengjing bank's operating income in the first half of this year fell sharply, and related indicators such as net interest margin were at a relatively low level in the industry, and its profitability needs to be improved.

in the first half of 2024, shengjing bank achieved a net profit of 592 million yuan, a year-on-year decrease of 25.1%; and achieved operating income of 4.56 billion yuan, a year-on-year decrease of 36.2%.

the interim report shows that in the first half of this year, shengjing bank achieved net interest income of 3.236 billion yuan, a year-on-year decrease of 2.743 billion yuan, a decrease of 45.9%, mainly due to the bank's interest income decreased by 4.857 billion yuan year-on-year.

figure/ shengjing bank 2024 interim report

in addition, interest income from loans and advances is an important part of the bank's interest income.

in the first half of 2024, shengjing bank realized interest income from loans and advances of 12.258 billion yuan, a year-on-year decrease of 29.8%, accounting for 74.5% of interest income, a year-on-year decrease of 7.5 percentage points. the bank said that this was mainly due to the year-on-year decrease in the average balance and yield of loans and advances during the reporting period.

among the non-interest net income, net income from fees and commissions fell the most, and net investment income became one of the few bright spots in revenue.

due to the decrease in the bank's agency and custody business fee income during the reporting period, the bank realized net fee and commission income of 19 million yuan in the first half of 2024, a year-on-year decrease of 121 million yuan, a decrease of 86.2%.

as of the first half of 2024, shengjing bank realized a net income of 2.342 billion yuan from financial investments, an increase of 1.204 billion yuan year-on-year, a growth rate of 105.8%, mainly due to the year-on-year increase in net income from the disposal of bond assets during the reporting period.

it is worth mentioning that in the first half of 2024, shengjing bank's operating expenses reached 2.774 billion yuan, an increase of 220 million yuan year-on-year, an increase of 8.6%.the increase in operating expenses resulted in a decrease in both revenue and net profit.

in a rating report recently released, united credit rating pointed out that shengjing bank's operating income has declined significantly, its net interest margin and profitability indicators are at a relatively low level in the industry, and its deposit interest payment costs still have room to be reduced. in addition, considering that the bank still faces certain credit risk exposure under the background of macro and regional economic pressure, its asset quality and provisioning level are still under pressure.

2

bad quality rises and falls,

asset quality continues to be under pressure

"jiemian news·bullet finance" noticed that in the first half of 2024, shengjing bank's non-performing indicators showed "one rise and one fall": the non-performing loan ratio decreased, and the total amount of non-performing loans increased.

as of the end of june 2024, shengjing bank's non-performing loans were 13.11 billion yuan, an increase of 304 million yuan from 12.806 billion yuan at the end of the previous year. the non-performing loan ratio was 2.66%, down 0.02 percentage points from the end of the previous year. the provision coverage ratio was 146.43%, up 7.05 percentage points from the end of the previous year.

statistics show that at the end of the second quarter of 2024, the non-performing loan ratio of my country's commercial banks was 1.56%, and the provision coverage ratio was 209.32%. the two indicators of shengjing bank were lower than the industry average, especially the non-performing loan ratio, which remained high.

in terms of loan composition, the largest components of corporate loans are customers in wholesale and retail, leasing and business services, real estate, manufacturing and construction industries.

in the first half of 2024, the loan balances provided by shengjing bank to corporate customers in the above five industries were rmb 291.563 billion, accounting for 59.2% of the total loans and advances issued by the bank.

however, among these industries, the non-performing loan rate in wholesale and retail industries has reached 4.85%, the non-performing loan rate in real estate is 2.36%, and the non-performing loan rate in construction industry is 2.54%.

figure/ shengjing bank 2024 interim report

in terms of personal loans, the non-performing loan rate of personal operating loans was 3.17%, and the non-performing loan rate of housing mortgage loans was 3.03%. credit cards among personal loans were particularly prominent, with a non-performing loan rate of 8.17%, far exceeding that of peers.

in terms of capital adequacy ratio, as of june 30, 2024, the bank's core tier 1 capital adequacy ratio was 10.26%, tier 1 capital adequacy ratio was 12.24%, and capital adequacy ratio was 13.93%. all three indicators declined compared with the end of 2023.

figure/ shengjing bank 2024 interim report

it should be noted that at the end of the second quarter of 2024, the capital adequacy ratio of my country's commercial banks was 15.53%, the tier 1 capital adequacy ratio was 12.38%, and the core tier 1 capital adequacy ratio was 10.74%. by this standard, although shengjing bank's capital adequacy ratios at all levels meet regulatory requirements, they are lower than the industry average.

in order to improve its capital adequacy level, shengjing bank issued an announcement on september 6 that it would issue secondary capital bonds (first phase) with an issuance scale of rmb 6 billion and a 10-year fixed-rate bond.

shengjing bank said that the funds raised from this bond issue will be used to replenish the bank's secondary capital. the successful issuance of this bond issue further improved the bank's capital adequacy level.

3

it fell to a "penny stock" in one year.

evergrande's shadow remains

public information shows that shengjing bank is the earliest and largest headquarter bank in northeast china. in december 2014, shengjing bank was successfully listed on the main board of the hong kong stock exchange.

one and a half years after its listing, the "evergrande group" started the road to controlling shengjing bank. through the secondary market, off-market bulk transactions and acquisitions, by 2019, evergrande held a total of 3.2 billion shares of shengjing bank, accounting for 36.4%, becoming the bank's largest shareholder.

during this period, at the end of 2017, shengjing bank's total assets exceeded one trillion yuan for the first time.

the expansion of asset scale is closely related to evergrande's entry. evergrande once issued an announcement stating that from 2020 to 2021, shengjing bank provided funds to evergrande group totaling rmb 32.595 billion.

at the same time, shengjing bank's personal housing loan business has grown explosively - in 2016, personal housing loans accounted for only 1.9%, but by 2022 this proportion had risen to 9.29%.in addition to corporate real estate loans, shengjing bank's housing-related loans accounted for as much as 22.2% in 2022, approaching the regulatory red line.

financial report data over the years show that shengjing bank's non-performing loan ratio has risen sharply since 2020. in 2019, the bank's non-performing loan ratio was only 1.75%. from 2020 to 2022, the non-performing loan ratio rose to 3.26%, 3.28% and 3.22% respectively, which is at a high level in the industry.

after that, with the demise of evergrande, shengjing bank began to return to state ownership, and evergrande’s shares were gradually taken over by shenyang state-owned assets.

in september 2022, evergrande "cleared" its equity in shengjing bank and transferred all of its approximately 1.282 billion domestic shares in the bank to seven companies including shenyang heping district state-owned assets management co., ltd.

currently, shengjing financial holdings is the bank's largest shareholder, holding 20.79% of the shares; shenyang hengxin holds 5.45% of the shares and is its second largest shareholder; the actual controllers of shengjing financial holdings and shenyang hengxin are both the shenyang state-owned assets supervision and administration commission.

at the same time as the equity changes, the de-evergrandeization of the senior management team is also underway.

in 2023, shengjing bank's leadership team underwent a major reshuffle, with the chairman, president, and chief supervisor all replaced. in the first half of 2024, the bank completed the replacement of the board of directors. the new "three heads" all came from state-owned banks and local municipal party committees and governments, and have rich management experience and good professional backgrounds.

in september 2023, shengjing bank announced that it had signed a 176 billion yuan asset sale agreement with liaoning asset management company. by selling non-performing assets, shengjing bank has reduced operating pressure and optimized its asset structure.

annual report data shows that shengjing bank's asset impairment losses dropped significantly in 2023, from 9.172 billion yuan in 2022 to 3.120 billion yuan; the non-performing loan ratio was 2.68% at the end of 2023, ending three consecutive years of "breaking 3".

however, after getting rid of a large amount of non-performing assets, shengjing bank's operating conditions have not improved significantly.

according to the annual report, the bank's operating income in 2023 was 10.04 billion yuan, a year-on-year decline of 37.8%; its net profit was 765 million yuan, a year-on-year decline of 25.50%. the bank's performance continued to decline in the first half of this year.

with poor performance, secondary market investors will naturally "vote with their feet".

since september 2023, shengjing bank's share price has plummeted from nearly hk$6, and in december 2023, the bank's share price fell below hk$1. as of september 13, 2024, the share price closed at hk$0.61, with a total market value of only 5.366 billion.

during this period, although shengjing bank's share price occasionally rebounded to above hk$1, it was difficult to maintain for long.

photo/eastmoney.com

usually, stocks priced below hk$1 are called “penny stocks” in hong kong, indicating that the market lacks confidence in the future performance of these stocks and the operating conditions of the companies.

overall, the new leadership team of this trillion-dollar bank has achieved remarkable results in risk mitigation, but in terms of business development, shengjing bank is still groping for the way forward.

will shengjing bank be able to continue to improve its asset quality and break through the current situation of declining performance in the future? it remains to be seen whether time and the market will give the answer. jiemian news bullet finance will continue to pay attention.