On the afternoon of June 26, Minsheng Bank (600016.SH) with a market cap exceeding 150 billion yuan and asset scale climbing to 7.73 trillion yuan held an information-intensive 2023 annual shareholders meeting.
Minsheng Bank has given investors a reassuring sign. In the past year, the bank's business development has been more stable, and the structural adjustment of both assets and liabilities has achieved positive results, with continuous improvement of asset-liability structure. It is worth emphasizing that the bank has always adhered to its established strategic goals, steadily promoted various reforms, and achieved significant results. The bank's operating development is showing a positive trend through sustained implementation of strategies and reforms.
In terms of Minsheng Bank's important issue of reform and transformation, what new signals did Gao Yingxin, the re-elected chairman of the ninth board of directors, release at the shareholders' meeting? What specific business strategies did the new president Wang Xiaoyong, who made his debut at the shareholders' meeting, mention? What positive disposal solutions did the bank take for the real estate loan to the public? What will Minsheng Bank rely on to maintain its development trend, small and micro characteristics, and advantages? Senior management of Minsheng Bank made candid and detailed explanations on these key issues that investors and the society are highly concerned about at this shareholders meeting.
Senior management of Minsheng Bank made candid and detailed explanations on these key issues that investors and the society are highly concerned about at this shareholders meeting.
Reform and transformation have shown positive effects.
In 2023 and the first quarter of 2024, Minsheng Bank achieved operating income of 140.817 billion yuan and 34.273 billion yuan respectively, a year-on-year decrease of 1.16% and 6.80% respectively; the two reporting periods achieved net income attributable to parent of 35.823 billion yuan and 13.431 billion yuan respectively, a year-on-year increase of 1.57% for the former and a decrease of 5.63% for the latter.
After years of performance fluctuations, Minsheng Bank hopes to return to steady growth on the basis of stabilization. The ideal is full, but the road to practice is rugged. In the current environment of high interest rate spreads, bearing the responsibility of enabling the real economy with financial support, banks face greater difficulties in achieving growth. Gao Yingxin, Chairman of Minsheng Bank, admitted at the communication meeting that the bank's revenue and net interest margin and other indicators are still under considerable pressure due to internal and external factors.
Data shows that throughout the whole year of 2023 and the first quarter of 2024, Minsheng Bank's net interest margin went down along with the whole industry. However, even with a narrow interest margin space, the bank insists on carrying out its reform and transformation to the end. In recent years, Minsheng Bank has continued to reduce non-standard investments, and at the same time increased credit investment in high-rating customers and the allocation of interest rate bonds to achieve a substantial reduction in credit risk under the sacrifice of some yield. In addition, they have also optimized the management structure of real estate lending and the loan structure for local financing platforms, making short-term impacts on the bank's operating income but benefiting its sustainable development in the long run.
Some positive effects of the reform and transformation have already begun to show. Gao Yingxin revealed in the latest communication that the progress of Minsheng Bank's various reforms is in line with expectations, and the positive trend is reflected in four aspects: firstly, business development is more stable and the asset-liability structure continues to improve; secondly, customer base continues to be consolidated and the customer base for strategic customers, small and micro customers, and individual customers has increased significantly; thirdly, asset quality continues to improve and the bank has completed the three-year plan for clearing non-performing assets while the generation rate of non-performing loans has decreased for three consecutive years; fourthly, the bank has promoted the landing of a differentiated small and micro new model, and its differentiated market competitiveness is gradually forming.
Institutional investors have also given positive prospects for the development of Minsheng Bank. Pacific Securities' research report published on June 6 believes that Minsheng Bank's overall scale is steadily growing and its small and micro loan business on the loan side performs well; it has increased non-performing asset disposal and asset quality is steadily improving.
Optimizing the structure to cope with interest rate challenges.
Wang Xiaoyong, the new president of Minsheng Bank who took office in March, also emphasized the necessity of bearing the development pains brought about by proactive strategic adjustments, and believed that "these adjustments are necessary, but have a certain impact on revenue in the short term." He also elaborated on the bank's management strategy of seeking progress while maintaining stability, optimizing structure and pursuing long-term improvement, and drew a development blueprint for the bank in detail.
Second-person pronouns are not necessary in the interrogative sentences. Gao Yingxin, the re-elected chairman of the ninth board of directors, released what new signals on the issue of reform and transformation of Minsheng Bank? What specific business strategies did the new president Wang Xiaoyong, who made his debut at the shareholders' meeting, mention? What positive disposal solutions did the bank take for the real estate loan to the public? What will Minsheng Bank rely on to maintain its development trend, small and micro characteristics, and advantages?
Senior management of Minsheng Bank made candid and detailed explanations on these key issues that investors and the society are highly concerned about at this shareholders meeting.
Wang Xiaoyong's "steadily advancing" refers to adhering to long-termism, adhering to the bank's strategic positioning of "private enterprises, agile openness, and attentive service", unwaveringly empowering the real economy in the five major areas of technology, green development, universal finance, retirement, and digitalization. The bank considers risk compliance to be an eternal theme. This long-termism was also frequently echoed in Minsheng Bank's 2023 annual report, where they remained firm in their strategic execution without being swayed by short-term performance pressures. They stressed the need for constant reform and transformation to solidify the foundation for long-term development and establish a good basis for accelerated growth.
"Structural optimization" is aimed at promoting business optimization and cost reduction through customer integrated operation, and at promoting customer service upgrades through coordinated asset and liability management. "Sequential improvement" aims to stabilize and increase core business and customer operation indicators on a daily, monthly, and annual basis, continuously improving operational performance.
"Overcoming interest rate pressure" is easier said than done. As an innovative joint-stock bank with vitality, how will Minsheng Bank adopt its strategy in the future? Deputy President Li Bin gave a specific answer: In the future, Minsheng Bank will take control of deposit costs as a starting point. Firstly, they will continue to consolidate the foundation of "operating with deposits"; secondly, they will adjust the deposit structure, vigorously develop payroll and payment settlement businesses, expand stable sources of low-cost settlement deposits, and thirdly, they will promote the pressure reduction of high-cost deposits.
The 2023 financial report shows that Minsheng Bank's total liabilities amount to 7.04 trillion yuan, a year-on-year increase of 5.94%; of which the total amount of deposits reached 4.28 trillion yuan, a year-on-year increase of 7.25%. This shows an effective drive of depositors' growth for the bank and an increase in the proportion of deposits to 60.86% of total liabilities. Focus on key business areas on the asset side and a stable asset structure, with total assets reaching 7.67 trillion yuan, a year-on-year increase of 5.78%. A comparison between the two sides shows that the growth on the liability side can support the expansion on the asset side, and the capital adequacy ratio remains stable, demonstrating the bank's internal dynamism.
There is good news regarding the liability side as well. Li Bin pointed out that deposit self-discipline has further strengthened, and the trend of declining deposit costs is obvious. While benefiting from this industry trend, Minsheng Bank will further optimize its asset structure, increase the proportion of loans in assets, and build on the advantages of specialized products to promote growth in regional features and supply chain businesses. This will help alleviate the pressure on asset yields and strive for greater interest rate space.
In 2023, Minsheng Bank's net interest margin was 1.46%, a year-on-year decrease of 14 basis points, while in 2024, it was 1.38%, an 8 basis point decrease from the end of 2023, showing a narrowing of the decline.
Improving asset quality remains a long and arduous task.
Regarding asset quality, Huang Hongri, deputy president of Minsheng Bank, answered the market's most concerned question.
As early as 2023, the market saw improvements in Minsheng Bank's asset quality. For example, China Merchants Securities' banking industry analyst Liao Zhiming team pointed out in their review of the third quarter report that Minsheng Bank's historical non-performing loan burden clearance rate is relatively high, and since 2020, the bank's asset allocation risk appetite has shown a significant decline. Thanks to this, the pressure on Minsheng Bank's asset quality may have "obstacles". Huang Hongri said that Minsheng Bank effectively prevented and controlled new risks, and the generation rate of non-performing loans has continuously declined for three years, and the quality of new loans is still excellent. In the handling of non-performing loan stock, the bank has accumulated nearly 400 billion yuan through three years of clean-up.
Huang Hongri said that Minsheng Bank has effectively prevented and controlled new risks, and the generation rate of non-performing loans has continuously declined for three years, and the quality of new loans is still excellent. In the handling of non-performing loan stock, the bank has accumulated nearly 400 billion yuan through three years of clean-up.
As in the 2023 financial report, Minsheng Bank's NPL ratio was 1.48%, down 0.20 percentage points from the previous year-end. The provision coverage ratio was 149.69%, up 7.20 percentage points from the previous year-end. In the first quarter of 2024, Minsheng Bank's non-performing loan ratio further declined to 1.44%, reflecting steady progress in asset quality.
Even with continuous asset quality improvements, Minsheng Bank did not let down its guard. Huang Hongri said that although Minsheng Bank's historical risk assets have been basically cleared, there are still some left, and their disposal is difficult, requiring time to gradually resolve. The risk of the real estate industry still exists, and there are still risks in real estate loans to public entities. To this end, Minsheng Bank has adopted various disposal measures, and the amount and proportion of loans have continued to decline, reducing the risk exposure.
The 2023 financial report showed that the proportion of the real estate industry in Minsheng Bank's total public loan amount and advance amount had been reduced from 8.77% to 7.90%; the total amount was 346.298 billion yuan, a decrease of 17.046 billion yuan from the end of the previous year.
Regarding shareholders' loans, such as those from Fantasia, Huang Hongri also responded, saying that Minsheng Bank has continued to reduce the credit exposure, dynamically evaluate and provisions for value reduction, and that related loans account for a small proportion of the bank's total loans, with sufficient provisions to offset the impact on business development.
The previously mentioned Pacific Securities research report believes that Minsheng Bank has solidly promoted the construction of its internal control system, improved its risk management level, implemented its risk management objectives, and increased the intensity of bad loan disposal in recent years, leading to stable asset quality.
Small and micro characteristics illuminate the way forward.
Small and microfinance has always been a business card of Minsheng Bank. From the early beginning of "careful and attentive service" to this characteristic track, it has been deeply cultivating for 16 years.
In 2023 annual report, Minsheng Bank achieved 15.8% and 27.4% growth in small and micro loans and inclusive small and micro loans respectively as a result of innovative development of inclusive finance and optimization and upgrade of small and micro finance, which also means that Minsheng Bank's advantage as a "leader in small and micro finance" has been further consolidated.
At present, Minsheng Bank is extending its industry chain through strategic clients, expanding its ecosystem, and promoting the integration of small, medium, and micro individuals, aiming to provide services for more upstream and downstream small and micro enterprises in the industry chain. However, as numerous banks target inclusive finance and small and micro finance with their sights on Minsheng Bank's small and micro "golden signature", will Minsheng Bank's advantage in this field be shaken?
To address these concerns, Minsheng Bank Vice President Shi Jie responded that the bank's rich experience and differentiated competitive advantages still exist. Data shows that by the end of 2023, the balance of small and micro loans of Minsheng Bank increased by 15.77% to 791.2 billion yuan, and the inclusive small and micro enterprise loans also recorded a double-digit high growth to 612.3 billion yuan, ranking second in the comparable industry, and with 510 thousand inclusive finance loan customers, the increase ranks first in the comparable industry.
Institutions still see Minsheng Bank's distinct advantages in small and micro enterprise loans. A research report released by gtja on April 11th pointed out that as compared with 2022, the number of inclusive small and micro enterprise loan customers of Minsheng Bank increased by 110.3 thousand in 2023, and the non-performing loan ratio decreased to 1.14%, indicating an obvious improvement in the depth and breadth of serving small and micro customers, as well as the distinctive features of small and micro loans.
Minsheng Bank's "moat" in the field of small and micro is still deepening. Shi Jie's detailed explanation at the shareholder meeting gives investors and the market confidence: first, the strategic determination and professional accumulation of deepening small and micro for 16 years have created a complete and mature set of small and micro financial service system of Minsheng Bank; second, the exclusive advantages of Minsheng Bank's small and micro team, whose service tentacles cover the whole country; third, the differentiated and customized advantages of credit services are created through upgrading measures such as "Beehive Plan"; fourth, a marketing model of integration of small, medium, micro individuals and "Five-in-One" comprehensive service advantages throughout the entire life cycle has been constructed; and lastly, the accumulated risk control mode and compliance capability are the support and guarantee of Minsheng Bank's small and micro services.
Having both hard power and "warm power" is the hope expressed by Minsheng Bank Chairman Gao Yingxin in the 2023 annual report, which is also in line with the bank's strategic commitment to serving small and micro enterprises wholeheartedly. He pointed out that Minsheng Bank is currently fully utilizing the leading role of enterprise culture, enhancing team cohesion, and shaping "warm power".
Adhering to long-termism, maintaining strategic determination, and doing "difficult and right things" will surely exchange for sustainable and steady high-quality development. By continuously making unremitting efforts towards the strategic positioning of "bank for private enterprises, agile and open bank, and bank with diligent services", Minsheng Bank will certainly achieve its goals and become the preferred bank for private, small and micro enterprises.
Author: Han