Ping An's First Mid-term Dividend: Reform Success and Pressure
Ji Guangheng stated that, from the current overall progress, this round of reforms has met the initial expectations.
The bank has achieved good results in adhering to strategic determination, optimizing business structure, strengthening coordination between headquarters and branches, and across departments, and promoting organizational culture construction.
"This year, Ping An Bank's capital adequacy ratio has performed well.
We will comprehensively assess the relationship between capital, business development, and shareholder returns, act within our capabilities, and strive to maintain a reasonable annual dividend level."
On August 16th, Ji Guangheng, the president of Ping An Bank (000001.SZ), said at the bank's 2024 mid-year performance release.
According to the 2024 mid-year report disclosed by Ping An Bank on August 15th, the bank's core tier-1 capital adequacy ratio has risen to 9.33%, and all levels of capital adequacy ratios meet regulatory requirements.
At the same time, the bank plans to distribute profits for the mid-year of 2024, paying a cash dividend of RMB 2.46 (including tax) per 10 shares, totaling a cash dividend of RMB 4.774 billion, accounting for 18.4% of the net profit attributable to shareholders in the consolidated statement.
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This is Ping An Bank's first mid-term dividend plan, which has attracted market attention.
The bank's deputy president and chief financial officer, Xiang Youzhi, said at the performance meeting, "In the past, because Ping An Bank's capital adequacy ratio was relatively low, now that we have solved this relatively large bottleneck problem, we will pay more attention to investor returns and further find a reasonable balance between dividends, capital adequacy ratio, and business development."
In fact, in the 2023 annual report released earlier, Ping An Bank had already proposed a dividend plan that far exceeded expectations: a cash dividend of RMB 7.19 (including tax) per 10 shares, totaling a cash dividend of RMB 13.953 billion, with a dividend payout ratio of over 30%, surpassing the previous year's cash dividend ratio level.
Regarding the full-year dividend for 2024, Ji Guangheng said frankly that for the rest of this year, he and his team will go all out to do a good job in business management, improve performance, and create more value for investors.
Wind (Wangde) data shows that as of the close on August 16th, Ping An Bank's share price was RMB 10.13/share, with a 1% increase.
Behind the unexpected dividend, the strategic reform that Ping An Bank initiated since last year has shown initial results.
"From the current overall progress, this round of reforms has met the initial expectations.
The bank has achieved good results in adhering to strategic determination, optimizing business structure, strengthening coordination between headquarters and branches, and across departments, and promoting organizational culture construction," said Ji Guangheng.
Specifically, Ji Guangheng said, first, adhere to the strategic positioning of retail banking.
Under the strategic guidance of "strengthening retail, refining corporate, and specializing in peers," in combination with market changes, peer practices, and its own characteristics, further promote the resolution of deep-seated management issues, improve retail customer groups, product, channel strategies, and risk models, study the direction of corporate asset allocation under new circumstances, and explore the coordination model between corporate and retail, starting from the perspective of the bank's asset-liability management, strengthen business linkage across departments and lines, and seek ways and paths to improve core indicators.
Second, flexibly respond to external environmental challenges and actively adjust customer group structure and improve business quality.
For example, promote the transformation of retail business from high-risk, high-cost, high-return to medium-risk, medium-return, and gradually achieve improvement in retail customer quality, asset quality, and asset structure through active management.
From internal management data, there are signs of stabilization and improvement in the current trend of net increase in retail loan balance and non-performing generation indicators.
Third, continue to create a collaborative cultural atmosphere.
From within the line to across lines, from headquarters to branches, and then to the front, middle, and back offices, the team's willingness to cooperate, tacit understanding, and communication efficiency have all been significantly improved.
Fourth, continuously improve organizational capabilities and team quality.
The new structure of the headquarters is running smoothly, and the cadre adjustments are in place; the branch structure adjustment and cadre rotation work are progressing orderly.
With the deepening of strategic reforms, Ping An Bank's echelon construction and talent reserve are more perfect, and a group of outstanding young cadres have taken up front-line business and management positions.
At the same time, through strengthening rotation and organizing training, the overall quality and ability of the cadre team and their awareness of independent operation have been significantly improved.
Fifth, inject vitality into strategic transformation with leading technology.
Explore new models of technology financial services, upgrade digital system tools, implement intelligent branch construction, and build a solid base for digital financial capabilities.
At present, technological innovation has been fully integrated into Ping An Bank's daily operations, and in the future, it will continue to strengthen the exploration of cutting-edge technology to drive business innovation and development.
However, while the reforms have achieved results, Ping An Bank also faces significant pressure.
Ji Guangheng frankly stated that there are still some pressures or uncertainties in the process of promoting reform and transformation, including that the current decline in revenue has narrowed but has not yet reached the expected target of around 10% or lower; in the current industry-wide interest margin pressure, the challenge of stabilizing the net interest margin around 1.9% still exists; the "fighting capacity" of branches and the bank's compliance management capabilities still need to be further improved.
The mid-year report shows that in the first half of 2024, Ping An Bank achieved a revenue of RMB 77.132 billion, a year-on-year decrease of 13.0%; it achieved a net profit of RMB 25.879 billion, a year-on-year increase of 1.9%, with a slowdown in growth.
In terms of asset quality, as of the end of June 2024, Ping An Bank's non-performing loan ratio was 1.07%, up 0.01 percentage points from the end of the previous year.
In addition, the net interest margin fell 0.59 percentage points year-on-year to 1.96% (note: the net interest margin for the whole year of 2023 was 2.38%, and in 2022 it was 2.75%), a rare drop below 2%.
Regarding the next interest margin expectations, Ji Guangheng believes that under the background of interest rate decline, the interest margin will remain stable at a certain reasonable level and cannot continue to decline indefinitely.
"Currently, maintaining the interest margin at around 1.8%, 1.9% in the next one or two years is very good."
Data released by the National Financial Regulatory Administration shows that in the first half of this year, the net interest margin of commercial banks was 1.54%.
Although it was the same as the first quarter, it decreased by 20 basis points compared to 1.74% in the same period last year.
Looking forward, Ji Guangheng emphasized that reform has never been a one-time effort or a one-trick solution.
Ping An Bank will closely monitor policy guidance and market changes, continuously adjust and correct based on the phased feedback during the reform process, and promote in-depth progress, with performance as the guide, to improve the overall level of business management.
"I hope that by 2026, Ping An Bank can get back on track and achieve good growth," said Ji Guangheng.
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