"Investor Network" Ding Yingyi

According to the 2022 annual report of Jiangsu Zhangjiagang Rural Commercial Bank Co., Ltd. (hereinafter referred to as "Zhangjiagang Bank", 002839.SZ), the bank achieved operating income of 4.827 billion yuan, an increase of 4.57% over the same period last year, the lowest growth rate since 2018, and a net profit of 1.682 billion yuan, up 29% from the same period last year.

Revenue growth slowed to the lowest in five years

According to the official website, Zhangjiagang Bank, which was officially listed on November 27, 2001, is the first local joint-stock commercial bank restructured by rural credit cooperatives in the country. On January 24, 2017, Zhangjiagang Bank was officially listed, becoming the first batch of listed agricultural and commercial banks in the country.

The 2022 report card released by Zhangjiagang Bank on March 27 can be described as a "mixed blessing".

In terms of total assets, by the end of 2022, the bank's total assets were 187.533 billion yuan, an increase of 13.95% over the end of last year. Of this total, loans and advances totaled 115.028 billion yuan, an increase of 15.24 percent over the end of last year, accounting for 61.34 percent of the total assets.

By the end of 2022, Zhangjiagang Bank's total liabilities were 171.807 billion yuan, an increase of 14.53 percent over the end of last year, of which customer deposits totaled 139.584 billion yuan, an increase of 15.23 percent over the end of last year, accounting for 81.24 percent of the bank's total liabilities.

In addition, according to the annual report, the bank's return net profit totaled 1.682 billion yuan in 2022, an increase of 29 percent over the same period last year.

However, the bank achieved operating income of 4.827 billion yuan last year, an increase of 4.57% over the same period last year, and the growth rate dropped significantly to the lowest level in nearly five years. From 2018 to 2021, Zhangjiagang's revenue growth rate was 24.07%, 28.48%, 8.87% and 10.05%, respectively.

Net income from handling fees and commissions decreased by more than 60%

According to the annual report, the bank's main business income is mainly composed of net interest income and non-interest net income, of which non-interest income includes service fee and commission income, net investment income, asset disposal income and so on.

In 2022, Zhangjiagang Bank achieved 3.917 billion yuan in net interest income, an increase of 6.11% over the same period last year, up from 2.5% last year, accounting for 81.15% of revenue. From the perspective of interest income structure, it mainly depends on personal loans, bringing a total of 3.267 billion yuan of interest income, an increase of 13.47% over the same period last year, accounting for 42% of the total interest income.

In comparison, non-interest income dropped from 925 million yuan to 911 million yuan, of which investment income was 685 million yuan, an increase of 8.08% over the same period last year. It is worth mentioning that in 2022, the net income of handling fees and commissions of Zhangjiagang Bank was 46.6799 million yuan, a decrease of 62.43% over the same period last year.

In terms of subdivision, agency business fees, settlement and settlement charges were all negative growth, down 32.27% and 4.11% year-on-year to 171 million yuan and 34 million yuan. In response, the bank's annual report explained that "the decrease in agency fees compared with the same period last year is mainly due to the decrease in income from the agent wealth management business." Zhangjiagang Bank explained in its annual report.

According to the data, the bank's fee and commission income in 2022 was 278 million yuan, down 18.87% from the same period last year, while the corresponding expenditure was 23200 yuan, an increase of 5.86% over the same period last year. Between one decrease and one increase, the net income of fees and commissions decreased by 62.43% compared with the same period last year.

In fact, from the income statement data over the years, it is not difficult to see that the net income of handling fees and commissions of Zhangjiagang Bank is relatively volatile from 2018 to 2020. Among them, the net income of handling fees and commissions lost 9.7819 million yuan in 2020. In 2021, the bank's net income of handling fees and commissions rebounded sharply, achieving a net income of 124 million yuan for the whole year, but declined sharply again in 2022.

In fact, in addition to the decline in agent financial income, the balance of non-capital preservation issued by Zhangjiagang Bank is also declining. According to the annual report, the balance of the bank's wealth management products stood at 21.233 billion yuan by the end of 2022, down 9.6 per cent from 23.488 billion yuan at the end of 2021. The income from handling fees and commissions also dropped from 218 million yuan to 155 million yuan, a decrease of 40.71%.

It is understood that with the continuous opening of the financial market and the continuous change of customer demand, the development of intermediary business has gradually become an important means for major banks to compete for market share and improve profitability. In terms of fee and commission business, Bank of China Ltd. industry has been involved in credit cards, fund sales, insurance agents and other areas, the development of these businesses has become an important driving force for the growth of banking business.

Bank analysts believe that fluctuations in fee and commission income are usually related to the adjustment of banking business structure and changes in the market environment, while fluctuations in fee and commission income may also reflect the efficiency of bank management and risk control. For example, if the bank's customer service quality is poor, or risk control is poor, it may lead to customer loss and business decline, which in turn affects the performance of fees and commission income.

In January this year, when an institutional survey asked "how to improve the middle income of 2023 financial management", Zhangjiagang Bank said that it would increase investment in product research and development, strengthen product design and investment research, and improve the middle income creation ability of proprietary financial products; steadily promote financial channel sales, optimize marketing strategies, pay attention to both self-financing and consignment financial management, and increase customer base development at the same time.

A sharp increase in non-performing write-offs and overdue loans

Among local financial institutions, Zhangjiagang Bank's market share of deposits and loans was 20.7% and 13.77% respectively, down 1.06 percentage points from the end of last year and up 0.11 percentage points respectively. Among the branches in other places, the loan balance was 58.049 billion yuan, an increase of 18.42 percent over the end of last year, accounting for 50.47 percent of the bank's total loans, down 0.1 percent from the end of last year.

In terms of asset quality, last year, the bank's defect rate was 0.89%, down 0.06 percentage points from the end of last year, and the provision coverage rate was 521.09%, an increase of 45.74 percentage points over the end of last year.

Behind the stabilization of asset quality and the improvement of risk offset ability, the bank has increased the non-performing write-off. According to the annual report, in 2022, Zhangjiagang Bank stepped up the write-off and disposal of non-performing loans, writing off 933 million yuan of non-performing loans for the whole year, an increase of 119.68 percent over the end of last year.

Industry insiders believe that although the write-off of non-performing loans will help reduce the risks and losses of banks, the write-off of non-performing loans will directly reduce the current profits of banks, and may also have an impact on the future profits of banks.

In addition, it is worth mentioning that by the end of 2022, the total amount of overdue loans of Zhangjiagang Bank was about 1.404 billion yuan, an increase of about 506 million yuan over the end of last year, and an increase of 56.38 percent over the same period last year.

From 2020 to 2022, the bank's total overdue loans rose for two consecutive years, from 602 million yuan in 2020 to 1.404 billion yuan in 2022. According to the classification of overdue days, by the end of 2022, the balance of overdue loans from 1 day to 90 days overdue increased most significantly compared with the end of last year, from 358 million yuan at the end of 2021 to 807 million yuan at the end of 2022, an increase of 125.66% over the same period last year (see figure below).

According to the "measures for risk Classification of Financial assets of Commercial Banks" jointly issued by the Banking and Insurance Regulatory Commission and the people's Bank of China, which will be formally implemented on July 1, 2023, financial assets should at least be classified as concern categories after the expiration of the time limit. More than 90 days and 270 days overdue should at least be classified as secondary and suspicious categories, and more than 360 days overdue should be classified as losses.

The classification of loans includes five categories: normal, concerned, subprime, suspicious and loss, among which non-performing loans mainly refer to subprime loans, suspicious loans and loss loans.

Combined with the above-mentioned "risk classification of financial assets of commercial banks", in short, the sharp increase in overdue loans may be classified as sub-category, suspicious category or loss category, which become the growth factor of non-performing loans.

In addition, it is worth noting that with the continuous consumption of capital by business expansion, Zhangjiagang Bank's core tier one capital adequacy ratio has declined for four consecutive years.

From the end of 2018 to the end of 2022, the bank's core tier one capital adequacy ratio was 11.94%, 11.02%, 10.35%, 9.82% and 9.36%, respectively, which decreased year by year.

According to the announcement on the evening of March 28th, the people's Bank of China has received a written administrative license for the company to issue financial bonds. it is agreed that the company should issue financial bonds in the national interbank market and overseas market. the new balance of financial bonds in 2023 should not exceed 2 billion yuan, and the balance of financial bonds should not exceed 9.5 billion yuan at the end of the year. This can play a role in the bank's capital, but there is nothing it can do for core tier one capital.

Whether the surge of overdue loans and non-performing write-offs will lay hidden worries for the development of the bank, while convertible bonds are difficult to quench thirst, it remains to be seen how the bank can replenish its core capital. (produced by thinking Finance) ■