Independent scarcity penetrates
If you bloom, butterflies will come!
Author: Mi Duo
Editor: Coke
Style: Mengqi
Source: Rhodium Finance - Rhodium Finance Research Institute
It was early summer, but Huishang Bank encountered an "eventful autumn".
On June 19, the Shanghai United Equity Exchange disclosed that Masteel (Group) Holdings Co., Ltd. (hereinafter referred to as "Masteel Group") officially listed and transferred 1759912 shares of Huishang Bank, accounting for 0.0127% of the total share capital, with a reserve price of 15.716 million yuan. If the transfer is successful, Masteel Group will no longer hold shares in Huishang Bank.
A "stud" naturally attracts the attention of all parties. In the view of Wang Jianhui, a senior researcher of industrial economy, on the one hand, it may be due to its own business and planning considerations; On the one hand, according to the requirements of the regulatory authorities, state-owned central enterprises should focus on their main business and clean up the equity of financial institutions they hold.
According to Beijing Business Daily, not only Masteel Group, but also Huishang Bank has a total of 82,730,400 shares listed on the exchange, including COFCO Corporation and COFCO Biotechnology Co., Ltd.
In addition to the frequent equity transfers, the two shareholders of the "thorn" have "made difficulties" again......
On June 16, Huishang Bank announced that on June 14, it received the "Proposal on the Profit Distribution of Huishang Bank in 2023" and the "Proposal on the Special Dividend Plan for Huishang Bank to Return to Shareholders" put forward by Wealth Honest Limited (a subsidiary of "Zhongjing"), a shareholder holding about 3.04% of the shares, and the shareholders' meeting originally scheduled to be held on June 28 will be postponed to June 29.
On the one hand, Masteel Group cleared its equity, and on the other hand, it was the "Zhongjing Department" and "raided" the shareholders' meeting, what happened to Huishang Bank?
1
Fierce battle for dividend ratio
Can the new account and the old account be settled together?
LEE
According to the announcement, Wealth Honest Limited submitted two provisional proposals. The first is the "11th Supplementary Ordinary Resolution", which proposes to adjust the dividend for 2023, proposing to distribute a dividend of 2.92 yuan per share according to 10 shares, and a total of about 4.058 billion yuan (tax included) of cash dividends will be distributed, which accounts for 30% of the net profit of 13.526 billion yuan of Huishang Bank Group in 2023.
According to the original dividend plan, a total of about 2.028 billion yuan of cash dividends will be distributed, and the cash dividend ratio will be about 15%, which is fully doubled.
In addition, another proposal, "Supplementary Ordinary Resolution No. 12", further proposes to make up the difference in dividends from 2016 to 2022 that did not meet this standard according to the 30% dividend standard, specifically 9.02 yuan per 10 shares.
Combining the two proposals, if calculated according to the current total share capital, the total dividends involved will exceed 10 billion yuan, which means that the new accounts and old accounts will be calculated together. Judging from the postponement of the original shareholders' meeting by one day, this time the difficulty was sudden, and Huishang Bank was a little caught off guard.
According to the 2023 annual report, the largest shareholder of the bank is Deposit Insurance Fund Management Co., Ltd., with a shareholding ratio of 11.22%; The second largest shareholder, Zhongjing Group, holds a total of 10.59% of the shares, namely Zhongjing Xinhua Asset Management holds 1.62%, Wealth Honest Limited holds 4.55%, Golden Harbour Investments Management Limited holds 3.17%, and Zhongjing Xinhua Asset Management (Hong Kong) Co., Ltd. holds 1.25%.
The shareholding ratio of other major shareholders does not exceed 10%; The public float ratio is 16.08%. As a result, there are four possible voting outcomes: if one of the two options is passed, then the adopted plan will be implemented; If both items are passed, it will not be possible to implement either plan, and the dividend plan will need to be notified separately; If both items are not approved, dividends will not be distributed according to these two plans.
In fact, this is not the first time that the "Zhongjing Department" has "raided" the shareholders' meeting, but the previous two failed times.
At the 2016 general meeting of shareholders, the board of directors of Huishang Bank proposed a dividend plan of 0.61 yuan per 10 shares to shareholders, about 10% of the net profit of the year. The "Zhongjing system" advocates maintaining the cash distribution level of about 30% of the net profit in the previous three years. In the end, the latter proposal was rejected by 68% of the votes against.
At the 2017 general meeting of shareholders, in response to the total cash dividend of about 276 million yuan originally planned by Huishang Bank, the "Zhongjing Department" once again believed that the dividend was too small, which would hit the confidence of investors, and then proposed a temporary plan of 3.671 billion yuan in cash, which was still not approved.
Going around and around, in the past 8 years, he has raised objections several times, and the more frustrated he is, the more courageous he has become, the more he has been fighting dividends, which shows that the dissatisfaction of the "Zhongjing system" has been around for a long time. What's going on? What are the odds of winning this time?
2
17 years of grievances
LEE
Freezing three feet is not a day cold.
According to public information, Huishang Bank is the first regional joint-stock commercial bank established by the joint reorganization of city commercial banks and urban credit cooperatives in China, and was listed on the main board of the Hong Kong Stock Exchange on November 1, 2013.
The relationship with the "Zhongjing system" can be traced back to 2007. At that time, Zhongjing Group and Shanshan Group jointly reorganized Zhongjing Sihai, which became an outbound investment platform company and acquired a total of 141 million shares of Huishang Bank.
Subsequently, in 2008, Huishang Bank launched a capital increase plan of up to 5 billion shares. Zhongjing Group originally wanted to be the largest shareholder, but in the end, Zhongjing Sihai only obtained another 300 million shares through additional issuance. In 2011, Zhongjing Group took over 200 million shares of Huishang Bank through its subsidiary Xiuning Xinhua Asset Management (later renamed "Zhongjing Xinhua").
After the listing of H-shares, Zhongjing Group continued to increase its shareholding through Wealth Honest. In 2015, it became the largest shareholder of the bank. As a result, Zhongjing Group's shares are no longer regarded as public shareholdings, resulting in the bank's public shareholding ratio falling to 24.78%, which is lower than the 25% level stipulated by the Hong Kong Stock Exchange. However, it was not until May 2016 that Huishang Bank announced that it was "aware of the lack of public float for the first time".
In fact, the two have long been divided. For example, in 2011, Huishang Bank proposed a plan to land on A-shares, but it did not submit its A-share prospectus for the first time until June 2015.
The China Times once quoted people familiar with the matter as saying that in the A-share application materials of Huishang Bank, Director Gao Yang (the major shareholder and actual controller of the "Zhongjing Department") did not sign, and there were other directors who did not sign. The main reason is that there are problems in corporate governance and that the situation stated in the application materials is inconsistent with the facts.
For example, in April 2016, Huishang Bank announced that it would hold the 2015 annual general meeting of shareholders at the end of May to consider a series of proposals on overseas non-public issuance of preferred shares. In this regard, Zhongjing Sihai Industrial quickly submitted a temporary proposal, proposing to terminate the overseas non-public issuance of preferred shares. Although the former proposal was finally passed as desired, it still made the outside world feel the contradictions and differences between the two.
Perhaps because of repeated setbacks, the "Zhongjing system" has gradually retreated. In August 2019, Zhongjing Xinhua Asset Management and Shanshan Holdings signed a framework agreement involving the transfer of shares in Huishang Bank and equity interests in Zhongjing Sihai. According to the agreement, Zhongjing Xinhua Asset Management transferred a total of 14.32% of its shares in Huishang Bank to Shanshan Holdings at a total price of 12.15 billion yuan.
However, in 2020, the two parties had a dispute over the above-mentioned transaction and accused each other of breach of contract, and even resorted to court. Even during the trial of the case, Zhongjing Department was not idle, and has been looking for a new receiver, and has contacted OCI International and Zhengwei Group. However, no new progress has been made by the end of 2023.
Several years of equity disputes have also brought uncertainty to Huishang Bank's return to A-shares and A+H.
3
The chairman of the board of directors fell one after another
Large fines torture internal control
LEE
In addition to the "troubles" of major shareholders, Huishang Bank itself is also in a constant situation.
On May 24, 2024, according to the Anhui Discipline Inspection and Supervision Network, Li Hongming, the former chairman of Huishang Bank, was sentenced to 14 years and 6 months in prison and fined 4 million yuan for the crime of accepting bribes and abuse of power. The court found that during his tenure as chairman, he violated relevant regulations and abused his power in the process of granting loans, renewing loans, and restructuring of enterprises, resulting in particularly heavy losses to national interests.
It is worth noting that Li Hongming is not the first chairman to be dismissed for corruption, and Wu Xuemin and Dai Hedi have also been investigated and punished for similar problems. From November 2017 to April 2021, the former "took over" Li Hongming as the chairman of Huishang Bank, although he was transferred to other companies, he was finally investigated for violations. The latter, as the first chairman of Huishang Bank, was sentenced to 12 years in prison and fined him.
The helmsman has repeatedly "overturned", which will inevitably make the outside world review the company's internal control system and risk control capabilities. At least judging from the previous regulatory fines, there is still a lot of homework to be made up at the level of business compliance operation.
On June 14, 2024, Huishang Bank Ningbo Branch was fined 2.6 million yuan for a number of violations, including changing the business address and name of the sub-branch without approval, missing credit management policies and procedures for some businesses, failing to perform due diligence in the "three checks" of loans, illegal inflow of credit funds into restricted areas, non-standard management of off-balance sheet business, inadequate data governance, and inadequate management of employee behavior.
On May 7, the Fuyang branch of Huishang Bank was fined 950,000 yuan due to problems such as inadequate monitoring of loan funds, part of the down payment of personal housing mortgage loans coming from developers, and imprudent management of credit card car installment business. On April 15, the Huangshan branch of Huishang Bank was fined 1.5 million yuan for issuing project loans in violation of regulations.
At the beginning of 2024, Huishang Bank was fined 3.95 million yuan for problems such as inadequate management, illegal provision of financing to false projects, imprudent interbank credit management, distortion of data in the EAST system, and non-standard management of entrusted payments.
According to Securities Star, in 2023, the head office of Huishang Bank and its branches will receive more than 5 "million-level" penalties, one after another with large fines, torturing the bank's internal management and risk control capabilities. Under the general trend of strong supervision, risk mitigation and high-quality development, how to consolidate the compliance fence and enhance the sense of awe is an urgent question.
4
The performance slowed down and the non-performing rate of real estate climbed
The dividend rate is "at the bottom" and there is still pressure to replenish blood
LEE
Compliance is the value base of listed companies. The chassis is unstable, which naturally affects the running form.
From 2021 to 2023, Huishang Bank's revenue will be 35.51 billion yuan, 36.23 billion yuan, and 36.37 billion yuan, with corresponding growth rates of 9.98%, 2.01%, and 0.37%; The net profit attributable to the parent company was 11.46 billion yuan, 13.4 billion yuan and 14.43 billion yuan, corresponding to the growth rate of 19.76%, 16.9% and 7.73%, and the profit growth rate showed a downward trend.
In the same period, the net interest income was 26.86 billion yuan, 28.7 billion yuan and 28.72 billion yuan, corresponding to the growth rate of 4.29%, 6.88% and 0.05%, according to which the revenue accounted for 75.64%, 79.22% and 78.97%. The high proportion means that Huishang Bank is still mainly based on traditional business, and its income structure needs to be upgraded and optimized.
In 2023, the bank's interest-bearing assets will be 1,560.582 billion yuan, a year-on-year increase of 16.67%. Among them, customer loans and advances were 840.513 billion yuan, a year-on-year increase of 17.68%, accounting for 53.86%; securities investment was 497.886 billion yuan, a year-on-year increase of 7.44%, accounting for 31.9%, and the cumulative proportion of the two reached 85.76%, but the average yield of the two decreased by 38 basis points and 21 basis points to 4.93% and 4.17% respectively, which dragged down the average yield of the overall interest-bearing assets by 26 basis points to 4.16%.
At the same time, the average cost ratio of customer deposits, which accounts for the largest proportion of interest-bearing liabilities, decreased by 1 basis point to 2.19%, coupled with the decline in the average cost ratio of borrowings from the central bank and issued bonds, which reduced the overall cost of interest-bearing liabilities by 2 basis points to 2.33% in 2023, resulting in a year-on-year decrease in net interest margin of 23 basis points to 1.88% below 2%, and a decrease of 23 basis points in net profit margin to 1.65%, which became the main factor for the slowdown in performance growth.
Non-interest net income increased by 1.59% year-on-year to RMB7,645 million, while net fee and commission income decreased by 32.89% to RMB2,805 million.
Flush data shows that among the 17 A-share city commercial banks in 2023, the largest revenue will be Bank of Jiangsu with 74.293 billion yuan, and the smallest will be Bank of Xiamen with 5.603 billion yuan, and Huishang Bank will rank 6th in terms of volume. However, in terms of dividends, except for Bank of Zhengzhou, the remaining 16 companies have implemented dividends, of which Bank of Suzhou has the highest proportion of 31.08%, and 15 have more than 15%.
Picture / Screenshot from straight flush
According to Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, Huishang Bank's revenue and net profit in 2023 are in the forefront of regional banks, and the cash dividend ratio is relatively low. This could indicate that the bank is doing well in terms of profitability and is relatively conservative in terms of cash returns to shareholders. The "New National Nine Articles" issued in April clearly proposed that listed companies should enhance the stability, sustainability and predictability of dividends.
Wealth Honest Limited's proposed also stated that from 2013 to 2015 after the listing of H-shares, Huishang Bank followed the institutional recommendations for cash dividends to account for more than 30% of net profit. However, since FY2016, the dividend level has been significantly reduced, and it has been at the bottom of the list of listed banks for many years. In 2021 and 2022, Huishang Bank's cash dividends accounted for only 12% and 15% of the net profit of the group's headquarters, respectively, and the total dividend ratio for two years was only 13.62%, ranking last among all 62 A-share and H-share listed banks.
The original dividend ratio in 2023 will only be 15%, which is seriously inconsistent with the performance of Huishang Bank, industry status and image, and also hit the confidence of the majority of small and medium-sized shareholders who have adhered to and supported Huishang Bank for a long time.
Wind data shows that since 2006, Huishang Bank has implemented 10 dividends, with a cumulative net profit of 127.65 billion yuan and a cumulative dividend of 16.09 billion yuan, with a total dividend rate of 12.60%.
According to data from Cinda Securities, in 2021 and 2022, Ping An Bank will have the lowest dividend ratios among A-share listed banks, with dividend ratios of 12.18% and 12.15. This means that the above-mentioned criticism of Zhongjing is not rigorous, and Huishang Bank has the lowest listed city commercial bank in the total dividend ratio in 2021 and 2022, but from a single year, 2022 is not the lowest for A-share banks.
However, compared with Bank of Hangzhou, Bank of Nanjing, and Bank of Ningbo, which have similar asset scales, Huishang Bank's dividend indicators are indeed at the "bottom" level. In 2022, the equity distribution of Huishang Bank, Bank of Hangzhou, Bank of Nanjing, and Bank of Ningbo is 1.29 yuan (tax included), 4 yuan (tax included), 5.339 yuan (tax included), and 5 yuan (tax included) for every 10 shares; The ratio of cash distribution to net profit was 12.98%, 20.31%, 30.00% and 14.31%; The total dividends were 1.947 billion yuan, 2.372 billion yuan, 5.523 billion yuan and 3.302 billion yuan, and Huishang Bank was in the lowest position.
However, Bai Wenxi also stressed that the level of dividends not only reflects the company's willingness to return to shareholders, but may also be related to the company's capital needs, development plans and regulatory requirements.
Wang Tingyan, an industry analyst, said that dividends should be divided into two, in addition to meeting the basic demands of investors' returns, but also combined with the company's own business, to retain enough capital to support the healthy development of subsequent business. "Only with sufficient capital can we ultimately bring more returns to investors.
So, where did the money "saved" by We-commerce Bank go?
At the end of 2021, 2022, 2023 and the first quarter of 2024, the bank's core Tier 1 capital adequacy ratios were 8.45%, 8.60%, 9.14% and 9.40%, respectively, with continuous growth. In addition, in 2023, the bank will optimize its capital structure through large-scale issuance of perpetual bonds to improve its own risk resistance. Among the 29 listed city commercial banks, 3 of them have issued perpetual bonds and Tier 2 capital bonds with a scale of 10 billion yuan, and Huishang Bank is among them.
Interestingly, despite such efforts, the tracking rating report released by China Chengxin International in May 2024 believes that Huishang Bank's core Tier 1 capital is still facing certain supplementary pressure.
In 2023, Huishang Bank's capital adequacy ratio will be 13.21%, Tier 1 capital adequacy ratio will be 10.82%, and core Tier 1 capital adequacy ratio will be 9.14%, while according to the data of the State Administration of Financial Supervision and Administration, the capital adequacy ratio, tier 1 capital adequacy ratio, and core tier 1 capital adequacy ratio of commercial banks in the same period will be 15.06%, 12.12%, and 10.54%, respectively, all higher than those of Huishang Bank.
It is also worth mentioning that in 2023, Huishang Bank's loan impairment provisions will reach 10.372 billion yuan, nearly three times that of 2022, and the loan provision coverage ratio will decrease by 4.63 percentage points to 271.94%. Coincidentally, the defect rate has also reached a low point in recent years, with 1.98%, 1.78%, 1.49%, and 1.26% from 2020 to 2023, respectively.
In terms of non-performing loans, the real estate sector increased from RMB113 million in 2022 to RMB2.541 billion in 2023, with the highest NPL rate, soaring from 0.33% in 2022 to 7.33%, a 22-fold surge.
5
Exceeding the business plan
How to realize the dream of A-shares?
LEE
After some combing, from the inside to the outside, new diseases and old problems, Huishang Bank's "stumbling blocks" are not few. How to eliminate the disappearance affects the odds of returning to A.
Fortunately, Huishang Bank did not stop there.
In February 2023, Huishang Bank announced that Kong Qinglong was appointed as the new president. Prior to that, he served as the director and general manager of Great Wall Plaza Asia International Investment Co., Ltd. (Hong Kong), the deputy general manager of the investment banking department of Industrial and Commercial Bank of China, the general manager of the private banking department of the head office of Minsheng Bank, and the president of Hefei Branch.
The 2023 annual report said that the bank will unswervingly do difficult but correct things, balance the relationship between current and long-term, scale and efficiency, direction and speed, and continue to enhance the core competitiveness of Huishang Bank, with a significant increase in the scale of operations, with total assets exceeding 1.8 trillion yuan, an increase of 14.3%, and a loan scale of more than 874.2 billion yuan, an increase of 14.4%. The core deposits exceeded one trillion yuan, the core Tier 1 capital exceeded 100 billion yuan, the revenue was increasing by nearly 15 billion yuan, and the various business plans of the board of directors were overfulfilled.
Successfully issued RMB 40 billion financial bonds, a record high. The scale of asset custody exceeded one trillion yuan, and it was awarded the Outstanding Underwriter and Special Contribution Award of CDB Bond for the first time.
In terms of serving the local economy, it has set up a leading group for the special promotion of new energy automobile industry clusters and set up automobile franchise sub-branches, providing credit of more than 78.5 billion yuan for the new energy automobile industry and providing financial support for 1,285 upstream and downstream enterprises.
Serving new quality productivity. The balance of loans to technology-based enterprises was 76.44 billion yuan, and the number of households was 6,617, an increase of 53.7%, and the business volume of "Common Growth Plan" and "Loan-Investment Batch Linkage" ranked first among financial institutions in Anhui Province. The balance of loans to private enterprises was 164.8 billion yuan, and the balance of loans to inclusive small and micro enterprises was 130.52 billion yuan, an increase of 24.8 percent. The balance of rural revitalization loans and agriculture-related loans was 54.26 billion yuan and 228.48 billion yuan, an increase of 34.9% and 25.5%.
Focusing on 2024, Yan Chen, Chairman of Huishang Bank, said that this is a key year for the implementation of the 14th Five-Year Plan, an important year for Huishang Bank to achieve the goals and tasks of the new round of Five-Year Plan, and a "breakthrough year for transformation" for the whole bank. In line with the strategic positioning of "three regions and one district" in Anhui Province and the goal of building "seven strong provinces", with the primary task of serving the high-quality development of the real economy, we will continue to improve high-quality financial services for key areas and weak links such as the construction of a modern industrial system, technological innovation, green development, and inclusive small and micro enterprises.
Obviously, whether it is internal governance or business operation, Huishang Bank is also making continuous optimization and improvement, and the economic and social benefits are worthy of recognition. From this point of view alone, all parties, including the Zhonghu system, need to be more patient and confident, and may as well let the "bullets" fly for a while.
It is worth noting that Huishang Bank has signed an initial public offering of A-share counseling agreements with CITIC Securities and Guoyuan Securities, and the counseling period is from January to March 2024. Beijing DeHeng Law Firm and Ernst & Young Huaming Certified Public Accountants (Special General Partnership) were invited to form a counseling working group and put forward relevant suggestions on corporate governance and standardized operation.
Up to now, Huishang Bank has not submitted the A-share IPO prospectus again. The accumulation of its own disadvantages and strong external supervision is not necessarily a good thing.
Big things are difficult to look at concentration, chance, and strength. The so-called iron still needs its own hardness, if you can use this window period to adjust and optimize in time, the dream of listing may not be far away.
Moving like a rabbit, quiet like a virgin! Aside from short-term profits and long-term benefits, the amount of dividends is just a reflection of confidence, in order to fundamentally settle the grievances of the two shareholders and reduce the uncertainty of returning to A, Huishang Bank must return to the fundamentals, do a thorough "cold bench", refine the basic product strength, and internal control basic skills.
After all, if you bloom flowers, you will come.