Produced by |Finance and Banking Society.
Article |Jia Ru.
Edit |He Bi.
In 1988, several events at home and abroad that seemed unrelated at the time became an important part of China's financial development history.
On the international front, since the 70s of the 20th century, with the rising tide of financial liberalization, the types and levels of risks faced by the international banking industry have increased rapidly, and the stability of the banking system has been seriously threatened. In order to enhance the resilience of the banking system and to promote fair competition.
At the beginning of 1988, the presidents of the first 12 national banks signed and issued the "Basel Agreement", which determined a unified method for measuring the minimum capital standard of banks, and emphasized the use of capital to buffer risk losses.
Although China's regulators did not introduce "capital adequacy supervision" until 10 years later, it is clear that capital replenishment has become an urgent issue in the development of China's banking industry, and "capital adequacy ratio" has become an important evaluation indicator for banks.
Domestically, in the spring of 1988, in order to implement the coastal economic development strategy, Fujian and Guangdong provinces asked for instructions to take the lead in carrying out comprehensive reform pilots and accelerating export-oriented economic development. Subsequently, the two provinces were approved to give preferential policies for expanding opening up and deepening reform, and agreed to set up regional joint-stock commercial banks in the two provinces to promote the reform of the banking industry, which outlined a development trajectory for IB -- a modern commercial bank with the joint-stock system as the organizational mode and operating in strict accordance with the laws of the market.
In the same year, Industrial Bank and Guangzhou Development Bank were established in Fuzhou and Guangzhou respectively.
Because China's market economy at that time was far from mature, the joint-stock system was still in the pilot, the state implemented a double-tight policy on finance and finance, and the company's funds were generally tight, when Xingye operated according to the idea of the joint-stock system, it was found that it was a very difficult thing to raise shares, and the smallest shareholder held only about 20,000 shares at that time. The bank's management tried their best to even recommend a director with a stake of 3 million yuan, but the market did not have the expected response.
As a result, the finance departments at all levels in Fujian Province subscribed for a majority of the equity with extra-budgetary funds and became the early shareholders of the bank.
Since there was no company law in China at that time, the equity design of banks was based on the practice of foreign counterparts, including RMB ordinary shares, preferred shares and foreign exchange shares, and began the initial exploration of corporate governance.
Listing of capital investment
For a long time after the establishment of IB, the Fujian Provincial Finance Bureau and the finance bureaus of various cities in the province were the major shareholders of IB. In order to further optimize the shareholder structure and meet the needs of building a national commercial bank, every time IB increases its capital and shares, it is a process of optimizing and improving the shareholder structure.
In 2002, in order to attract outstanding foreign banks and experts to participate in the decision-making of the board of directors of IB, learn from its advanced governance concepts and management techniques, and promote the improvement of corporate governance from within through the relative checks and balances of the shareholding structure, IB chose to attract capital first and then go public, although this plan is more complex and more challenging.
In the process of introducing overseas strategic investors, IB is like a girl waiting to be married, and it is not easy to choose the most suitable one for herself. In order to obtain the most favorable investment conditions for itself, IB has drawn up three competing investment portfolios, one of which is the combination of Hang Seng Bank, IFC (International Finance Corporation) and GIC (Singapore** Direct Investment Corporation) that we have seen so far.
Just before the door of the signing ceremony was opened, no one in the outside world knew to whom Xingye's hydrangea was thrown. After much deliberation, IB finally chose the combination of Hang Seng Bank, IFC and GIC.
Among the three foreign investors introduced, Hang Seng Bank is known for its sound corporate governance, good internal control and outstanding retail business; IFC is an international financial institution funded by the first countries in various countries, with the purpose of promoting the construction of market economy and financial system reform in developing countries, providing loans and equity investment to mixed economy projects in developing countries; GIC is Singapore's leading platform for investing in the mixed economy, focusing on the potential and growth prospects of investee companies.
Therefore, the determination of this investment combination undoubtedly reveals IB's strategic intention of actively drawing on the advanced management technology and experience of outstanding foreign banks, promoting the transformation of the bank's own business and profit model, and building a first-class bank and a century-old IB.
So far, IB has taken P B18 times and the highest shareholding ratio has accumulated 2498% of the investment attracted three overseas strategic investors, including Hang Seng Bank, IFC and GIC, and became the largest number of foreign shareholders, the highest shareholding ratio and the highest premium multiple of Chinese commercial banks at that time.
The difficulties of the IPO road are obvious to all, but the twists and turns of listing like IB are really a bit typical of the long road. It took five years from the second half of 2002, when IB began to seek listing, to February 5, 2007, when IB's A-shares were listed on the Shanghai Stock Exchange.
As the first stock in the first year of the full opening up of the financial industry, and also the first first-class stock in 2007 to raise more than 10 billion yuan, IB's successful listing has established its position as an excellent blue-chip stock in the domestic capital market and established its mainstream position among domestic banks. As Li Renjie, then president of IB, said, "IB is not just listed for the sake of financing, nor is it just for the sake of standardization, but based on a starting point - to build a first-class modern bank, which we call '100 years of IB'".
The fall of the king of the industry
As one of the earliest joint-stock banks, IB's growth path is quite different.
In 2005, IB connected a number of small and medium-sized banks to its own platform through the establishment of the "bank-bank platform", and by virtue of the advantages of unlimited settlement time and settlement amount, IB quickly accumulated a large number of interbank customers.
In addition, on the liability side, IB absorbs high-cost interbank deposits; At the same time, on the asset side, residential mortgage loans were used to drive retail business, and real estate loans and trust beneficiary rights were used to drive corporate business.
However, after 2006, IB's business ushered in a period of rapid growth, and as of 2015, IB's total assets surpassed that of China Merchants Bank, ranking first among domestic joint-stock banks.
At that time, IB also became the king of the industry in the out-and-out way.
However, in 2016, the financial supervision entered a cycle of "strict supervision", and the model of relying on the rapid expansion of interbank and non-standard business was unsustainable, and IB began business adjustment and strategic transformation under the "deleveraging".
The year-on-year growth rate of Henyep's total assets fell rapidly from 15% in 2016 to 5.5% in 20174%, the year-on-year growth rate of its total assets bottomed out in 2018 and then rebounded, and the year-on-year growth rate of total assets showed a downward trend in the past three years, falling to about 8% in 2022.
It is not difficult to see that under the trend of strict supervision, IB's model of relying on interbank and non-standard business expansion is unsustainable, and its business focus has returned to the basic business of bank deposits and loans and the intermediate business under the advantages of licenses, so that the growth rate of its assets has remained at the same level as the overall growth rate of the industry.
From 2018 to 2021, the year-on-year growth rate of IB's revenue once exceeded that of China Merchants Bank, showing a good momentum of business development. However, with the decline in macroeconomic growth and the overall net interest margin of the banking industry, the profitability of a bank based on high capital costs, such as IB, is becoming increasingly tight.
In recent years, IB, which is eager to transform, has focused its business on real estate, and from the perspective of NPL rate, IB's NPL rate has been declining since 2019, indicating that its asset quality has continued to improve. From 2019 to the third quarter of 2023, the defective rates were: 09% and 107%。
However, we know that the identification of non-performing assets and non-non-performing assets is sometimes subjective. This means that banks can choose to be more "flexible" in setting the criteria for determining non-performing goods, or even whitewash them as such. As a result, we often need to speculate on possible changes in the bank's asset quality in conjunction with the provision coverage ratio.
Since 2019, IB's provision coverage ratio has gone through a process of first increasing and then decreasing, and its provision coverage ratio has increased from 199% to 269% before 2021. After 2021, IB's provision coverage ratio has decreased, and as of 2023Q3, its provision coverage ratio has dropped to 238%.
Provision has an important function, which is to "make up for the apology with abundance". If a bank's provision coverage ratio falls from a high level, it is likely that it is using past excess provisions to absorb new non-performing provisions. In the first three quarters of 2023, IB increased the provision to maintain the stability of the provision coverage ratio, which should be to prepare for the subsequent occurrence of new non-performing goods, which are likely to come from the real estate sector.
Affected by the continuous pressure on real estate sales, the profitability of real estate enterprises has declined, the solvency of real estate enterprises has weakened, and the corresponding risk of housing-related loan business may rise, resulting in the banking industry as a whole may face a new round of credit risk exposure of real estate enterprises.
In the face of such a situation, IB also mentioned in the third quarter report of 2023 that it would increase the risk disposal and resolution in key areas such as real estate, first-class financing platform and credit card business, and set up a flexible and agile team to mobilize the professional strength of the whole group and cooperate with its branches to jointly resolve and resolve the disposal.
Judging from its latest financial report, IB recorded revenue of 502 in the third quarter4.9 billion yuan, down 8 percent year-on-year64%, compared to a decline of 4 percent in the first half of the yearCompared with 15%, IB's performance in the third quarter was very bad.
In addition, IB's basic earnings per share in the third quarter was 107 yuan, down 17 year-on-year05%, diluted earnings per share of 099 yuan, down 16 percent year-on-year81%, and basic earnings per share after deducting non-recurring gains and losses were 106 yuan, down 17 year-on-year83%, weighted average return on equity 324%, down 102 percentage points.
Weighted average return on equity after deducting non-recurring gains and losses321%, down 105 percentage points, almost none of the above indicators did not decline, the only increase was the cost-to-income ratio, which was 30 in the third quarter30%, an increase of 1 year-on-year13 percentage points.
If we look at the timeline extended, at the end of 2015, IB's revenue was about 154.3 billion yuan, and in those three years, IB's revenue has been at this level.
However, in 2017, IB's revenue suddenly dropped to 140 billion yuan, which was obviously affected by strict supervision.
In the subsequent 2019, the revenue stood at 180 billion yuan again, and in 2020, 200 billion yuan stood at 220 billion yuan.
In the past seven years, no matter how the revenue changes, the attributable net profit of IB has increased every year, regardless of the decline in revenue in 2017 or the low growth of revenue in recent years.
In 2023, in the face of declining revenue, will the new President Chen Xinjian be able to lead IB to continue to challenge itself, break its own curse, and return to the top of the king?