Miao Jianmin, chairman of China Merchants Bank, said that if the dividend ratio is increased, it does not plan to come down. It is hoped that equity financing will not be done in the future, while maintaining a strong endogenous growth ability, and maintaining a reasonable and high dividend ratio, so as to coordinate the relationship between the three.
China Fund News reporter Liu Ming
Proposing to build a benchmark for joint-stock banks as a "value bank", China Merchants Bank has brought investors an excellent "dividend value", and the dividend ratio has been raised to 35% at a high level. Regarding the increase in dividends, at the annual results meeting just held, Miao Jianmin, chairman of China Merchants Bank, said that there is no intention to reduce the dividend rate if it is increased. Miao Jianmin also said that he hopes not to do equity financing in the future, while maintaining a strong endogenous growth ability, and maintaining a reasonable and high dividend ratio, so as to coordinate the relationship between the three.
On the morning of March 27, China Merchants Bank's 2023 annual results meeting was held in Hong Kong and broadcast live online, with the company's chairman Miao Jianmin, president and CEO Wang Liang, vice president and chief risk officer Zhu Jiangtao, vice president and chief financial officer and board secretary Peng Jiawen attending, the meeting was presided over by Xia Xiangfang, the company's securities affairs representative and director of the board of directors' office. The leaders at the meeting introduced the performance overview, business information, outlook and strategy of China Merchants Bank, and exchanged questions and answers with participating institutions and media, and also answered questions from individual investors. It is understood that nearly 4,000 domestic and foreign investors, analysts and media reporters attended the meeting.
The content of the performance meeting will cover dividends and dividends, balanced and synergistic business of the four major sectors, risk management and control in the real estate field, changes in the business environment, business strategies in key regions, retail finance development, changes in non-interest income such as commissions and fees, institutional reforms, future ROE, interest margin changes and many other aspects.
Regarding the balanced development of business, Wang Liang said that in order to maximize the comprehensive value of value banks, they need the balanced development of the four major business segments: retail finance, corporate finance, investment banking and financial market, and wealth management and asset management. However, balanced development does not mean ignoring the strategic dominant position of retail banks, and the synergy of various sectors can better support the dominant position of retail finance. Wang Liang said that balanced and coordinated development does not mean that it has lost its characteristics, and China Merchants Bank will continue to maintain its characteristics.
Miao Jianmin also said that China Merchants Bank has always emphasized the need to adhere to the construction of an "innovation-driven, model-leading, distinctive value creation bank", from the past "deposit bank" and "retail forcible" characteristics, to the current "science and technology bank", these characteristics must be maintained, the future characteristics will be more distinct. Wang Liang said that it is necessary to speed up the creation of a competitive advantage in the company's financial characteristics.
On the evening of March 25, China Merchants Bank released its 2023 annual report, in which China Merchants Bank achieved operating income of 339.123 billion yuan, a year-on-year decrease of 1.64%, and a net profit of 146.602 billion yuan, a year-on-year increase of 6.22%. China Merchants Bank plans to pay a cash dividend of 1.972 yuan per share, with a total cash dividend of 49.734 billion yuan. The proportion of total cash dividends to the company's net profit increased to 35.01%, a step up from the high proportion of 33.01% in 2022.
After the release of the annual report, on March 26, China Merchants Bank's A and H shares rose sharply, with A shares rising by 3.35% and H shares rising by 4.33%, leading the rise in bank stocks in both A and H markets.
At the close of trading on March 28, China Merchants Bank's A shares closed at 32.18 yuan, and the company's total market value reached 811.6 billion yuan, second only to the four major state-owned banks of China Construction and Agriculture. The latest price-to-book ratio (PB) of China Merchants Bank's A-shares is 0.88 times, the highest among all A-share bank stocks, reflecting the capital market's recognition of the bank's investment value.
1. Talk about increasing the dividend ratio to 35%: If it is raised, it is not planned to come down, and China Merchants Bank is a value bank with low valuation and high dividends
Miao Jianmin said that the strategic goal of China Merchants Bank is to build a "value bank". Paying relatively high cash dividends to shareholders is an important part of creating value for shareholders. In 2023, most shareholders of China Merchants Bank will not make much or no money on capital gains (stock price), so increasing the dividend payout a little can improve the overall return of shareholders.
Miao Jianmin said that according to the calculation of China Merchants Bank's 2023 dividend plan, the dividend yield of China Merchants Bank's A shares is now more than 6%, and the dividend yield of H shares is more than 7%. Therefore, China Merchants Bank is a value bank with low valuation and high dividends, and China Merchants Bank has increased the dividend payout rate, "since it has been raised, it has no intention of coming down again".
However, as for whether it will be increased every year in the future, Miao Jianmin said that this needs to balance the relationship between cash dividends and medium and long-term capital accumulation. It is hoped that there will be no equity financing in the future, but at the same time, it will maintain a relatively strong ability to grow endogenously of capital, and maintain a reasonable and high dividend ratio, so as to coordinate the relationship between the three.
2. Pay attention to the research and analysis of China Merchants Bank, praise the suggestions and criticism, and attach great importance to feedback from all aspects
Before answering the question, Wang Liang talked about the fact that after the annual report came out, he read a lot of analysis articles on China Merchants Bank, which showed that China Merchants Bank attaches great importance to market feedback.
Regarding the market reaction after the release of the annual report, Wang Liang said that the annual report was released on Monday (evening), and yesterday (Tuesday) China Merchants Bank, whether A shares or H shares, was leading the rise, which fully reflected the trust and recognition of investors in China Merchants Bank.
Wang Liang said: In the past two days, he has carefully read a lot of analytical articles, and many investors have praised and recognized China Merchants Bank, and some have put forward some suggestions and opinions or even criticism, and he attaches great importance to the opinions of various quarters; he will think about how to do a good job in the operation and management of China Merchants Bank on the basis of the suggestions and opinions of various quarters.
A small detail worth noting is that the results meeting of China Merchants Bank was not held immediately after the disclosure of the annual report, as is the case with many listed companies. Many companies usually disclose their annual reports the night before and hold an earnings meeting the next day. China Merchants Bank disclosed its annual report on the evening of March 25 and held a performance meeting on March 27. In the middle of this day, you can fully understand the market's analysis and judgment of the annual report of China Merchants Bank.
In previous years, China Merchants Bank's annual results meeting was often held on Monday, while the annual report was disclosed on the previous Friday night, and the market had a weekend to dig and interpret the bank's annual report, and then the bank held a performance meeting.
3. Talking about business balance: Relying only on retail finance, the four major business sectors should develop in a coordinated manner and maintain their characteristics
Regarding the balanced development of the business of various sectors, some analysts said when asking questions that the business balance proposed by China Merchants Bank last year was a little difficult to understand at first, but now they are slowly trying to figure it out. As the "king of retail" in everyone's mouth, Wang Liang now emphasizes coordinated development, and Wang Liang also analyzed the logic behind it.
Wang Liang said that in the overall business development last year, it did face the influence of some industry, cyclical, and some policy factors, and the pressure on operation increased and the difficulties increased. However, under the correct leadership of the board of directors and the strong support of all parties, certain business achievements have been achieved, and a situation of steady progress and improvement has been achieved.
Wang Liang said that as Chairman Miao Jianmin said in his speech in the annual report, the "background color has not changed, the foundation is very thick, and the confidence is very sufficient", which highly affirmed the overall operation of China Merchants Bank last year. Looking back on 2023, "it seems to be the most ordinary and strange, but it is easy but hard". China Merchants Bank will, as always, maintain relatively good operating results.
Wang Liang said that last year, according to the strategy of the board of directors, it was proposed to build a value bank, which is to provide comprehensive value for shareholders, customers, employees, society and partners. In order to realize comprehensive value, it is necessary to achieve the balanced development of the four major business segments of retail finance, corporate finance, investment banking and financial market, wealth management and asset management, and play a synergistic role and promote each other.
However, Wang Liang also said that balanced development does not mean ignoring the strategic dominant position of retail banks, and to continue to maintain the dominant position of retail banks, China Merchants Bank should continue to explore and innovate unswervingly. However, only by relying on the integrated development of retail banking, "it is difficult to speak alone", "going alone and going far", and the coordinated promotion of various sectors, can we better support the main position of retail finance.
Therefore, it is necessary to accelerate the creation of the company's financial characteristic competitive advantage, strengthen the business development of investment banking and financial markets, and create new business growth poles. Wealth management and asset management business is also an important product line to support the development of retail banking business. Wealth management and asset management are important product lines supporting the retail banking business, which is not only in line with the successful experience of advanced international banks, but also in line with the future development trend of the domestic banking industry.
Wang Liang said: Balanced development achieved very good results last year. China Merchants Bank will not lose its characteristics because of balanced and coordinated development, and will continue to maintain its characteristics, but it will have stronger capabilities, a more complete product line, and more able to pass through the economic cycle.
4. Talking about risk prevention and control in the real estate sector and supporting the reasonable financing needs of enterprises: the downward trend of the non-performing rate of real estate has not changed
For the market to pay attention to the real estate sector risk management and control, how to consider asset quality and support the reasonable financing needs of real estate development enterprises, etc. Zhu Jiangtao, vice president of China Merchants Bank, said that by the end of 2023, the non-performing rate of China Merchants Bank's real estate was 5.01%, an increase of 1.02 percentage points from the beginning of the year, but compared with the high point at the end of June 2023, it showed a downward trend quarter by quarter. Looking at the overall situation this year, there are no major changes. Looking at the non-performing generation of real estate as a whole in 2023, the absolute amount of generation decreased by 36.6% compared to 2022.
For 2024, Zhu Jiangtao said that he has made a preliminary prediction on the risks involving the real estate industry, and there is a high probability that the absolute amount of non-performing generation in the real estate industry of China Merchants Bank this year will decrease compared with 2023. At the same time, in accordance with the principle of collecting all receivables and verifying all that should be verified, we will increase the collection and disposal of existing risk assets, and it is expected that the quality of assets related to the real estate industry will remain stable.
Regarding the risk of real estate spillover, Zhu Jiangtao said that there is pressure in this area, such as the construction industry and the business varieties with real estate as collateral. China Merchants Bank has conducted a special investigation on the ecosystem, upstream and downstream of the real estate industry. Judging from the investigation, the current asset quality is generally within a controllable range.
Regarding the balance between the implementation of national policies, meeting the reasonable financing needs of enterprises, and the asset quality and safety of banks, Zhu Jiangtao said that the 2024 annual meeting of China Merchants Bank will focus on the construction of three major projects, focus on three key points, and do a good job in closed management. Focus on three key points, one is to focus on the whitelist customers with two total scores, the second is to focus on the key areas of the first and second lines, and the third is to focus on the protection and improvement of the real estate format. At the same time, the closed management of the project side should be implemented.
Zhu Jiangtao said that China Merchants Bank had previously proposed that the high risk of this round of real estate adjustment will occur in 2023. At present, there has been no fundamental change in general.
5. Talking about the impact of agency insurance and fund fee reduction: The pressure will still exist in 2024, but positive factors are also seen, and the capital market is expected to bottom out
Regarding whether there is room for further decline in insurance and fund rates, as well as the situation of non-interest income this year, Peng Jiawen, vice president of China Merchants Bank, said that from the subjective desire, it is hoped that it will not decline again and can remain relatively stable. However, it is uncertain whether there is room for decline, and it depends on policy factors.
Peng Jiawen said that last year, the insurance agency rate and fund management fee rate declined, and the income of China Merchants Bank's wealth management business was under obvious pressure. As far as the income of intermediate business is concerned, the fee and commission income of the banking industry have been under greater pressure last year, and China Merchants Bank has been more affected. Last year, the fee and commission income of the annual sales fund, wealth management and trust all declined, and the highlight of the growth was the 9.33% increase in the fee income of the agency insurance. However, behind the increase of 9.33%, the agency insurance premium increased by 33% that year, which was used to make up the price.
Peng Jiawen analyzed that there are three reasons for the decline: First, the business volume has decreased; second, structural changes; due to the downturn in the capital market, the business income of equity products with relatively high rates last year has declined; the transformation of non-cash into cash products in wealth management products is also the transformation of products with high rates into products with low rates; and third, policy changes, including fee reductions in insurance and funds. Peng Jiawen said that the pressure on the growth of fee and commission income in 2024 still exists.
Although facing a lot of pressure, Peng Jiawen said that he also saw some positive factors accumulating. With the support of various policies, the capital market is expected to bottom out and rebound, and the bond market and bill market also have some structural opportunities, which will bring some structural growth opportunities to the income of intermediate business.
As for how to do, Peng Jiawen said that the first is to grasp the customer group, through the expansion of the customer base to bring revenue growth; the second is to grasp the operation of existing customers, this year's CMB retail customers AUM (asset scale) growth is very good, including the arrangement of some product structure, such as the growth of insurance throughput and structural changes, to a certain extent to alleviate the impact of the fee reduction policy.
Sixth, increase the investment in branches in key regions, and hope that these regions can make greater contributions
Some analysts said that in the 2023 annual report of China Merchants Bank, for the first time, some relevant development indicators of 17 key branches, including loan increments and loan balances, were disclosed, and it was also proposed to create new growth points for high-quality development. Wang Liang elaborated on the development of China Merchants Bank's branches in key areas.
According to the annual report of China Merchants Bank, by the end of 2023, the growth rate of core deposits, AUM and corporate loans of branches in 17 key regions was higher than the average level of the whole bank. As of the end of the reporting period, the balance of corporate loans of 17 key regional branches was 867.679 billion yuan, an increase of 124.941 billion yuan from the end of the previous year, accounting for 37.37% of the company's total loans, and the proportion of loan increment in the overall increase of corporate loans reached 55.66%.
Wang Liang said that in recent years, in addition to emphasizing that retail business is a strategic priority, he is also exploring how to make various businesses more in line with the trend of China's economic and financial development, and in which regions can find new growth points. In recent years, the regional differentiation of China's economy has been more obvious, and financial resources have been concentrated in some key regions, such as the Yangtze River Delta region, the Greater Bay Area, the Bohai Rim, the Chengdu-Chongqing Economic Belt, and the western part of the Taiwan Strait.
Wang Liang said that China Merchants Bank keeps pace with the times, in accordance with the national development strategy and its own development needs, and increases investment and layout in these regions, hoping that institutions in these regions can make greater contributions to the whole bank. CMB's measure is to increase the resource investment of branches in these key regions from the head office level, including the scale of manpower, capital and credit. At the same time, these branches are required to implement the development strategy and tactics of the head office under the premise of controlling risks.
Wang Liang believes that the population in these regions has shown a net inflow, and the retail business has huge development potential, so it is necessary to implement the development strategy of the retail banking business of the head office. In addition, these regions have developed emerging economies and manufacturing industries, which require a faster growth rate than the average of the whole bank in terms of manufacturing loans, loans to scientific and technological innovation enterprises, and inclusive financial loans for small and medium-sized enterprises.
Wang Liang said that by increasing investment, clarifying the objectives and tasks of branches in key regions, and implementing the development strategy requirements of the head office, they will gradually improve their various businesses and profit contributions, so that the profit contribution of China Merchants Bank can be more balanced.
7. On the asset quality of retail loans: the risk is controllable and will remain stable in 2024
Regarding the asset quality and risk of the retail side, Zhu Jiangtao said that as of the end of 2023, the non-performing ratio of CMB's residential mortgage loans was 0.37%, an increase from the beginning of the year, but lower than the average level of its peers, and from the perspective of overall non-performing generation, the non-performing generation rate of CMB's residential mortgage loans in 2023 was 0.22%, the same as at the beginning of the year. The overall risk of CMB's residential mortgage loans is at a low level.
Zhu Jiangtao said that from the perspective of the distribution structure of the proportion of personal housing mortgage loan assets of China Merchants Bank, the proportion of first- and second-tier cities is about 87%, and the weighted average mortgage ratio of personal housing mortgage loans is 32.93%. Stress tests show that the defect rate rises to 0.66% under moderate stress conditions, and the risk is generally at a low and manageable level.
For consumer loans, Zhu Jiangtao said that the non-performing rate at the end of 2023 was 1.09%, an increase compared with the beginning of the year, which is basically consistent with the overall risk performance of the whole market. Zhu Jiangtao said that the positioning of CMB's consumer loan customers mainly focuses on three categories: first, customers who issue on behalf of customers, second, customers in high-quality industries, and third, customers in specific industries in specific fields. There is a mismatch between the customer positioning of CMB's consumer loans and the customer positioning of credit card loans, and the same is true of the overall risk performance. As of the end of 2023, the NPL generation rate of CMB's consumer loans is 0.94%, and the NPL generation rate of credit card loans is 4.25%, which forms a differential positioning.
Zhu Jiangtao said that from the perspective of income performance, the yield of consumer loans is better than that of personal housing mortgage loans, and also better than small and micro loans.
In terms of credit card loans, Zhu Jiangtao said that the non-performing rate at the end of 2023 was 1.75%, and the non-performing generation rate was 4.25%, both of which were down compared with the beginning of the year. However, the NPL generation rate of 4.25% of CMB's credit card loans is still at a relatively high level, higher than the pre-epidemic level. However, we have also seen a phenomenon that after the adjustment of the "stable and low volatility" strategy of credit cards, the overall non-performing generation rate has shown a steady downward trend year by year.
Looking ahead to 2024, Zhu Jiangtao believes that the overall retail business risk of China Merchants Bank is controllable and will remain stable.
8. At present, ROE and ROA are at a high level in the domestic banking industry, and the goal is to "be better than the market, better than peers, and constantly surpass ourselves"
The banking industry is under pressure, and for the future sustainable development of ROE (return on net assets) and ROA (return on total assets), Miao Jianmin said that bank operations have cycles, and the performance of ROE and ROA also has cycles, which change with the bank's operating cycle. In previous years, the ROE of US banks in the zero interest rate stage was not high, about 10%, and after entering the interest rate hike cycle, the ROE increased significantly.
Miao Jianmin said that from the current point of view, the ROE and ROA of China Merchants Bank are at a high level in the domestic banking industry. In 2023, CMB's ROE is 16.22% and ROA is 1.39%. The performance of ROE and ROA depends on R (Return, return, income), not on E (Equity, equity assets, net assets), nor on A (Assets, total assets). I hope that R will be more stable in the downward cycle of the bank, and R may go down, but strive to go down less.
Regarding the performance of ROE and ROA, Miao Jianmin said: "Our goal is to be better than the market, better than peers, and constantly surpass ourselves." ”
Miao Jianmin said that if the banking industry enters an upward cycle, it is hoped that ROE and ROA will perform better, maintain the competitiveness of the industry will always be strong, and always live slightly better than others, and the return of investors will be slightly higher.
9. Talking about the opportunities and advantages of retail banking: leading in wealth management and financial technology, intelligent applications saved 17,000 manpower last year
Regarding the development space and opportunities of retail banking, Wang Liang said that at present, China's retail banking business still has a huge market and opportunities. China is a large country with a population of 1.4 billion, with more than 400 million middle-income groups, and with the development of the economy, more people will enter the middle-income group and above. This is a huge market for retail banking, so banks are placing a high value on the development of retail banking.
Wang Liang said that China Merchants Bank's accumulation in the past 20 years has laid a good foundation, so it must seize such an opportunity.
Wang Liang believes that for the development of China's retail banks, there are two biggest opportunities at present: one is the opportunity of wealth management. With the growth of people's income and wealth, the demand for wealth management is the general trend, and the second is the opportunity for the development of artificial intelligence. In the past, banks relied on crowd tactics and physical outlets to develop wealth management and retail banking, which made it difficult for banks to meet customers' ever-changing, efficient, convenient, accurate and personalized service demands. Therefore, it is necessary to rely on the opportunities brought to China Merchants Bank by financial technology, especially the technological transformation represented by artificial intelligence.
Wang Liang said that China Merchants Bank has stepped up its efforts in both wealth management and artificial intelligence, and has achieved a certain leading edge.
In terms of wealth management, in recent years, China Merchants Bank has built a large wealth management value cycle chain, including improving the ability to create value for customers, managing risks for customers, establishing our circle of friends and ecosystem, and co-prosperity with partners, so as to provide good investment products for the majority of investors. Wang Liang said: In this respect, they have achieved certain advantages.
In terms of financial technology, digital transformation and artificial intelligence, Wang Liang said that with the strong support of the board of directors, a financial technology fund has been set up to increase investment in science and technology every year. Last year's investment reached 14.126 billion yuan, which has been more than 14 billion yuan for many years, and the investment amount is not less than 4.5% of revenue.
Wang Liang said that through long-term efforts, China Merchants Bank has made qualitative changes in serving customers well in "online, data-based, intelligent, platform-based, and ecological", and has achieved very good results in serving customers and reducing labor costs. Wang Liang said that the manpower saved by intelligent applications reached 17,000 last year, and 12,000 people were saved the year before last. Without these investments, China Merchants Bank would not have been able to achieve the results of serving 197 million retail customers today.
10. Talking about interest margins: It will continue to be under pressure, but the downward pace may slow down this year, and this year's net interest margin level may be the relative bottom in the next few years
Regarding the interest margin issue that the market is concerned about, Peng Jiawen said that net interest margin is a common problem for the banking industry. Last year, net interest margins across the banking sector came under pressure.
In 2023, CMB's net interest margin will be 2.15%, a year-on-year decrease of 25 bps. Peng Jiawen said that whether it is the absolute level of net interest margin or the decline rate, China Merchants Bank is still relatively good among its peers. Peng Jiawen judged that the net interest margin of the banking industry will continue to be under pressure in 2024. He said that his view has been the same for several years, and the net interest margin will continue to be under pressure, which has finally been confirmed.
However, Peng Jiawen also said that in the process of net interest margin continued to be under pressure, it is necessary to pay attention to the pace of change. From the perspective of the reasons for the pressure, the impact of last year's repricing will continue to appear, and the reduction of the interest rate of existing mortgage loans began in September last year, and its impact will continue to be released this year. In February this year, the 5-year LPR fell by 25 bps, and the impact will continue to be felt this year. The combination of the above factors will definitely lead to a continuous decline in loan yields this year.
Peng Jiawen believes that from the perspective of the pace of change, in the process of net interest margin decline, the month-on-month decline may gradually slow down, and the year-on-year decline may also be a gradual convergence process.
Taking the change in China Merchants Bank's net interest margin last year as an example, the first quarter was the high point of net interest margin, and the following quarters continued to decline, from 2.29% to 2.04%. If we look at the year-on-year change, the net interest margin pressure in the first quarter of this year is likely to be the biggest for the whole year. If we look to the future, this year's net interest margin level is likely to be a relative bottom in the next few years.
Editor: Huang Mei
Review: Xu Wen