In order to enhance market competitiveness and resolve financial risks, the merger cases of small and medium-sized banks are common in recent years. The development after reorganization can be seen from the performance data. On May 5, the reporter of Beijing Business Daily found that bank of Sichuan and Liaoshen bank had released their annual reports for 2021. Due to the impact of merger time and development, the performance of the two banks was different. The Bank of Sichuan has only been in the initial stage of its development plan to increase its net profit in more than three years, and the Bank of Sichuan has only been in the initial stage of its establishment. It is expected that the restructuring of small and medium-sized banks will help to improve the operation efficiency of some small and medium-sized banks and reduce the risk of interbank competition through the restructuring of small and medium-sized banks.
Sichuan bank earned 600 million annual performance “bright”
One year after the reorganization, Bank of Sichuan recently handed over its first complete annual performance report since its establishment, and the growth rate of revenue and net profit was “bright”. In 2021, the bank achieved a revenue of 3.51 billion yuan, a year-on-year increase of 61.1%, and a net profit attributable to shareholders of the parent company of 620 million yuan, an increase of 89.97% over the previous year.
Net interest income is the main source of revenue of Bank of Sichuan. In 2021, the net interest income of the bank was RMB 3.139 billion, with a year-on-year increase of 57.48%, and the increase of interest income was 31.21%, exceeding the increase of interest expenditure. At the same time, other non interest income increased rapidly. During the reporting period, the income increased by 165.55% to RMB 305 million. However, the net income from handling fees and commissions decreased slightly, decreasing by 3.69% to 666474 million yuan.
“The merger and reorganization of Bank of Sichuan took place earlier, and it has entered the normal operation stage in 2021, and its business has entered the normal track.” Wang Jianhui, a senior banking analyst, said that in terms of operating level, other non interest income of Bank of Sichuan increased rapidly, up more than 160% compared with the same period of last year, and the growth rate of interest income also exceeded the growth rate of interest expenditure. Therefore, the profitability of Bank of Sichuan in 2021 was significantly improved compared with the same period of last year.
According to the data on the official website, Bank of Sichuan was established on November 7, 2020. It is the first provincial Legal Person Urban Commercial Bank in Sichuan Province Based on Panzhihua commercial bank and Liangshan Prefecture commercial bank, introducing 28 investors and adopting a new merger. According to the 2021 report, by the end of the reporting period, the total assets of Bank of Sichuan had increased to 184.82 billion yuan, and the total liabilities also increased by 44.42% to 153.55 billion yuan over the same period of last year.
In terms of asset quality, the non-performing loan ratio of Bank of Sichuan improved in 2021. By the end of the reporting period, the non-performing loan ratio of the bank had decreased by 0.52 percentage points to 1.59% compared with the previous year, and the provision coverage ratio had decreased by 14.21 percentage points to 319.93% compared with the end of the previous year. However, from the average situation of the industry, according to the index data of urban commercial banks in 2021 disclosed by the CBRC, the provision coverage ratio of urban commercial banks was 188.71%, This indicator of Bank of Sichuan is higher than the industry average.
According to Zhou Maohua, the analyst of China Everbright Bank Company Limited Co.Ltd(601818) financial market, the asset scale, operating performance and asset quality of Bank of Sichuan after merger and reorganization have been significantly improved. On the one hand, due to the steady recovery of regional economy, the operating conditions of enterprises have been continuously improved; On the other hand, in terms of asset scale, non-performing assets and other indicators, the efficiency of Sichuan bank in serving the real economy after merger and reorganization has been significantly improved.
Liaoshen bank strives to turn losses into profits in three years
Liaoshen bank, which opened in June 2021 and completed the merger of Yingkou Coastal bank and Liaoyang bank three months later, is still in the initial stage of development. As the merger of the two banks has just been completed, the original liability structure has not been adjusted in time and the asset business has been gradually expanded. In 2021, Liaoshen bank achieved a revenue of -474 million yuan and a net profit attributable to the parent company of -1.19 billion yuan. For the reason of negative revenue, Liaoshen bank explained in its 2021 annual report that it was mainly caused by the upside down of interest margin. During the reporting period, the bank realized a net interest margin of – 1.23%.
In terms of asset quality, there is a certain pressure on Liaoshen bank. In 2021, the non-performing loan ratio of the consolidated standard was 6.02%, which has broken the red line of supervision not higher than 5%. However, the provision coverage of the bank is high. During the reporting period, the provision coverage has exceeded 700%, reaching 721.13%. In addition, the capital adequacy ratio is also relatively sufficient. By the end of 2021, the core Tier-1 capital adequacy ratio, Tier-1 capital adequacy ratio and capital adequacy ratio of Liaoshen bank were 21.98%, 21.98% and 24.98% respectively, higher than the average index of 13.08% of the current capital adequacy ratio of urban commercial banks.
Liao Hekai, an analyst at Jinle function, believes that the negative net profit of Liaoshen bank is mainly due to the fact that the bank’s integration has not been completed for a long time, the heavy historical burden, and the main energy in the current period is still integrating and solving the problems left over by history. However, after the integration, the bank has strong capital strength, high capital adequacy ratio and provision coverage. After the subsequent internal problems are properly solved, the operating performance will be significantly improved.
Facing the existing performance, Liaoshen bank also mentioned in its annual report that it will improve the interest margin by improving the asset liability structure, expanding the income of intermediate business, and strive to turn losses into profits and repair the balance sheet in three years. In terms of disposal of non-performing assets, the bank said it would establish and improve the non-performing asset management system, strengthen post loan management and non-performing asset management functions, and actively collect and dispose of non-performing assets exposed to risk through clearing, packaging, write off and bond restructuring.
In addition to the existing merged banks, it was also reported that Liaoshen bank would merge Fuxin bank, Panjin bank, Anshan bank and other banks in the province. For the authenticity of the news, the reporter of Beijing business daily contacted Liaoshen bank, but as of the time of publication, he had not received a reply.
“group heating” to seek differentiated competitive advantage
In recent years, the merger and reorganization of small and medium-sized banks has gradually become a trend. In April 2021, the Bank of Shanxi, established by the merger and reorganization of Datong bank, Changzhi bank, Jincheng bank, Jinzhong bank and Yangquan commercial bank, opened its business. However, affected by the epidemic, the bank recently issued an announcement to postpone the disclosure of the 2021 annual report, saying that the audit work has not been completed and is accelerating the relevant work. The annual report is expected to be released in June.
In addition, Zhongyuan bank, a Hong Kong listed bank, plans to absorb and merge three urban commercial banks in Henan Province. According to the previous announcement of Zhongyuan bank, the bank entered into an absorption and merger agreement with Bank of Luoyang, Pingdingshan bank and Jiaozuo China travel service bank. According to the absorption and merger agreement, the consideration of this absorption and merger is 28.47 billion yuan.
“The merger and reorganization through marketization and legalization will help to straighten out the ownership structure, improve internal governance, prevent and resolve the potential risks of some small and medium-sized banks. The merger and reorganization of some small and medium-sized banks will help to reduce the inefficient competition among banks, reduce the Risk Spillover of individual small and medium-sized banks, and consolidate the foundation for industrial development. At the same time, the steady operation of banks will help to improve the ability of financial services to the local economy.” Zhou Maohua believes that the development direction of small and medium-sized banks in the future is clear, with clear equity, perfect internal governance, main responsibility and main business, deep cultivation in the regional market and differentiated competition strategy with large banks. Considering the number of small and medium-sized banks and the banking business environment, it is expected that in the future, some small and medium-sized banks will promote the supply side structural reform through merger and reorganization, effectively prevent and resolve risks, improve their business capacity and market competitiveness, and better serve the real economy.
For how to improve the competitiveness of the merged and restructured small and medium-sized banks in the region, Wang Jianhui suggested that the merger and reorganization of small and medium-sized banks will continue to increase in the future. The merged and restructured small and medium-sized banks should determine their own business development ideas in combination with regional advantages or relevant characteristic industries in the region, and should not blindly copy the development models of other regions. In addition, we should continue to increase investment in financial science and technology, reduce costs, improve efficiency and control risks through financial science and technology means, so that the operation can return to the normal track as soon as possible.
