① Following a number of urban commercial banks, the four major banks of China Construction Workers and Agriculture will simultaneously announce arrangements for mid-term dividends tonight. ② All four major banks have made it clear that when formulating the 2024 profit distribution plan, they will consider the factors of the mid-term cash dividends that have already been distributed. ICBC also made it clear that the annual dividend will deduct the portion of the mid-term dividend that has already been distributed. ③ Listed banks have added medium-term dividend plans one after another, with the intention of responding to the previous requirements of the new “National Nine Rules” to strengthen dividends.
Financial Services Association, April 29 (Reporter Zou Juntao) After several urban commercial banks mentioned mid-term dividends one after another, major state-owned banks settled the deal tonight.
On the evening of April 29, China Construction Bank, Agricultural Bank, Industrial and Commercial Bank, and Bank of China also issued a board resolution announcing the review and approval of the 2024 mid-term profit distribution arrangements.
It is worth noting that the four major state-owned banks all stated that the total cash dividends for the 2024 fiscal year accounted for no more than 30% of the group's current after-tax profits attributable to the Bank's shareholders.
More importantly, all four major banks have made it clear that when formulating the 2024 profit distribution plan, they will take into account the medium-term cash dividends that have already been distributed. ICBC also made it clear that “the amount of interim profit distribution already distributed will be deducted when the 2024 profit distribution plan is subsequently formulated.”
A Financial Services Association reporter noticed that since the introduction of the new “National Nine Rules” for the capital market on April 12, the boards of directors of many listed banks, including Bank of Shanghai, Bank of Suzhou, and Bank of Lanzhou, have successively passed the relevant 2024 mid-term dividend plans.
However, before the four major banks made statements, the relevant bill at the level of urban commercial banks did not clarify the relationship between mid-term dividends and annual dividends.
On April 29, a number of industry insiders said in an interview with the Financial Services Association that listed banks have added medium-term dividend plans one after another, with the intention of responding to the previous requirements of the new “National Nine Rules” to strengthen dividends.
The above interviewees also confessed that in recent years, factors such as banks continuing to benefit the real economy and narrowing net interest spreads have squeezed some profit margins, and there are challenges for banks to continue to increase dividends. A number of interviewees said that increasing the frequency of dividends does not mean that the dividend rate and scale of dividends will increase.
A number of banks will pay mid-term dividends, which the industry says are responding to the new “National Nine Clauses”
A Financial Services Association reporter noticed that several banks have now formulated mid-term dividend plans. Prior to the four major state-owned banks, some urban commercial banks had already taken the lead in announcing that they would pay mid-term dividends.
On the evening of April 26, the 22nd meeting of the 5th board of directors of the Bank of Lanzhou announced a resolution to pay an interim dividend for the 2024 semi-year limited to the net profit attributable to common shareholders of the parent company in the current consolidated statement. On the evening of the same day, the 15th meeting of the 5th board of directors of the Bank of Suzhou announced a resolution to review and pass a bill requesting the shareholders' meeting to authorize the board of directors to decide on the 2024 mid-term profit distribution plan.
Earlier, on the evening of April 25, the 33rd meeting of the 6th board of directors of the Bank of Shanghai announced a resolution agreeing to the 2024 mid-term profit distribution. The Bank of Shanghai stated that the distribution conditions must meet requirements such as net profit attributable to common shareholders of the parent company in the current consolidated statement being positive, that capital adequacy ratios at all levels are not lower than regulatory standards and corporate capital management planning goals, or that capital adequacy ratios at all levels are not lower than regulatory standards and corporate capital management plan goals after implementing cash dividends.
A number of banks mentioned above stated in the announcement that the purpose of formulating a 2024 mid-term profit distribution plan is to further clarify investors' expectations and enhance investors' sense of attainment. It is worth noting that the above related proposals still need to be submitted to the shareholders' meeting for consideration.
On April 29, a stock bank researcher told the Financial Federation reporter that recently, a number of listed banks have proposed medium-term dividend plans, which formally constitute “multiple dividends in a year” and actively implement the “Nine Rules of the State” policy measures relating to strengthening dividends. A bank analyst at a brokerage firm in southwest China told the Financial Federation that the bank's move was in response to the new “Nine National Rules.”
Will there be an increase in dividends? Industry insiders: Banks have limited room to increase dividend rates
However, “against the backdrop of a decline in the overall profit growth rate of banks, there are certain challenges in the viability of banks to increase dividends.” Yu Fenghui, an economist and new finance expert with 40 years of experience in large state-owned banks, believes that banks have supported the development of the real economy by lowering loan interest rates and reducing fees in recent years, which has reduced banks' profit margins to a certain extent.
A Financial Services Association reporter noticed that in January of this year, the China Financial Supervisory Administration announced that in 2023, commercial banks' net profit was 2.38 trillion yuan, an increase of 3.24% over the previous year. The former Banking Insurance Regulatory Commission announced in the previous year that in 2022, commercial banks achieved cumulative net profit of 2.3 trillion yuan, an increase of 5.4% over the previous year.
Yu Fenghui said that in this situation, to increase dividends, banks need to find new profit growth points or optimize cost structures on the basis of ensuring steady development of core business and effective risk control. Furthermore, regulators have strict requirements on banks' capital adequacy ratios. Banks must balance the relationship between shareholders' interests, regulatory requirements, and long-term development when deciding on dividend strategies.
The aforementioned analyst at a brokerage bank in Southwest China also told the Financial Federation reporter that currently the upper limit of the dividend rate in the banking sector is basically around 30%, and there is limited room for further growth, and there is still pressure on the banks themselves to supplement their assets. She pointed out that in the current situation where external supplementary channels are limited, banks' core capital can only be replenished through endogenous profit retention.
Many interviewees believe that an increase in the frequency of dividends is not equivalent to an increase in the dividend ratio or scale of dividends. The aforementioned analyst at a brokerage bank in Southwest China pointed out, “The frequency only changed twice, and the overall dividend rate (may) not change.” A relevant person from a commercial bank in a listed city also confessed to the Financial Federation reporter, “I feel like it's a question of cutting the 'cake' once or twice.”
In fact, the Financial Services Association reporter also noticed that the four major banks all clearly stated in the relevant 2024 mid-term dividend plan announced tonight that the profit distribution plan for the end of 2024 will take into account or deduct the amount of mid-term profit distribution already distributed.
Are mid-term dividends just a gimmick? Interviewees say it still has a positive impact
Yu Fenghui pointed out that if the dividend ratio remains the same, the actual effect of multiple dividends is more reflected in the frequency of cash flow distribution rather than a significant increase in total volume. He believes that this practice can easily be interpreted as a “gimmick” that outweighs actual benefits.
An analyst at a brokerage bank in Southwest China mentioned above said that if the dividend ratio and dividend size do not change, and only increase the frequency of dividends, it only means that investors can get a portion of the dividends in advance.
However, Yu Fenghui also believes that the increase in the frequency of dividends by listed banks is undoubtedly also a positive sign from the perspective of the market and investors. On the one hand, more frequent dividends can improve the efficiency of the use of funds and increase the attractiveness of investments for investors seeking stable returns on cash flow. On the other hand, this approach also strengthens the market's confidence in banks' profitability and financial health, as it means that banks have sufficient profits and cash flow to support multiple distributions.
Furthermore, “the multi-year dividend mechanism also helps banks to better manage capital structures and make timely adjustments to cope with market changes.” Yu Fenghui pointed out that in the long run, when considering adjustments to dividend policies, banks should comprehensively consider all factors to ensure the rationality and long-term benefits of the dividend policy. Investors also need to pay more attention to the sustainability of dividends, the total amount, and the degree of compatibility with banks' profitability, rather than just the increase in the number of dividends.