HANGZHOU, China, Aug. 30, 2023 /PRNewswire/ -- On August 29, 2023, China Zheshang Bank ("CZBank" or "the "Bank") announced its latest interim results for 2023. During the reporting period, the Bank recorded 33.227 billion yuan in operating revenue, a year-on-year increase of 4.68%. Net profit attributable to shareholders was 7.743 billion yuan, a year-on-year increase of 11.03%, marking a return to double-digit growth after four years. Operating performance continued to outperform the market.
"Despite challenging external economic conditions and internal capital constraints, we delivered excellence in the first half of this year," said Lu Jianqiang, Secretary of the Party Committee and Chairman of CZBank. "This is marked by both leading numbers and high-quality development. The combination of a solid foundation, structural optimization, and a market upturn brings our goal of achieving our 'three top-tier objectives' much closer to reality."
The focus on non-cyclical assets makes significant improvements in operational quality and efficiency
In the first half of 2023, the CZBank consistently focused on its four key strategic initiatives: driving digital transformation, deepening its presence in Zhejiang, expanding its five main business sectors, and enhancing its wealth management services. Furthermore, the Bank upheld its twelve-word operating philosophy "consolidating foundation, adjusting structure, controlling risks, and increasing profitability", in a bid to carve out a distinctive development path aligned with its unique characteristics. The Bank remained committed to championing its 'finance for good' ethical banking campaign, providing vital support to businesses facing challenges. Simultaneously, CZBank increased its focus on non-cyclical assets, paving the way for sustained, high-quality growth.
Data showed that CZBank's loan growth during the reporting period ranked among the highest for national joint-stock banks, demonstrating a steady increase in business scale. As of June 30, 2023, total assets climbed to 2.91 trillion yuan, of which loans and advances issued amounted to 1.65 trillion yuan, an increase of 11.07% and 8.40% respectively over previous year-end figures. Total liabilities reached 2.73 trillion yuan, of which customer deposits accounted for 1.82 trillion yuan, an increase of 11.27% and 8.42% respectively compared to the end of last year.
During the period, CZBank underscored its commitment to serving the real economy. The Bank ramped up its lending, specifically targeting retail customers as well as small and micro-businesses, and deepening its engagement in supply chain finance. At the same time, the Bank maintained a focus on its primary responsibilities and main businesses, while continuing to enhance operational performance. During the period from January to June, the bank's net interest margin stood at 1.95%. Despite the bank actively supporting the real economy and implementing policies to assist struggling businesses, the net interest margin still increased by 4 basis points from the first quarter's figures, marking the first time it has risen in two years.
The Bank also delivered exceptional results in non-interest income. During the reporting period, net non-interest income totaled 9.258 billion yuan, rising 8.88% year-on-year and accounting for 27.86% of operating income, an increase of 1.07 percentage points from a year ago. Income generated from green financial products and services rose to 1.6 billion yuan, a year on year surge of 47.6%, significantly higher than that of other robust revenue streams, most notably those from bond underwriting, syndicated loans, custodial services, and brokerage services.
CZBank's emphasis on enhancing revenues from green financial products and services, coupled with their strategy of bolstering countercyclical assets—a concept pioneered by the Bank to navigate economic fluctuations—has yielded significant results. In the first half of the year, revenue from small dispersed assets, assets from industries with low cyclicality, and fee-based customer services reached 9.516 billion yuan. This represented 29.58% of the total revenue, marking a growth of 1.05 percentage points from the beginning of the year and a significant jump of 5.24 percentage points since the strategy's inception in June 2022. Notably, small dispersed assets from areas like retail banking, micro-loans, and supply chain finance contributed to 65% of the total loan volume growth.
Asset quality improves with higher capital adequacy ratio
In terms of asset quality, which has garnered significant attention from the market, CZBank prioritized risk mitigation as a primary strategic initiative. The Bank has established a comprehensive large-scale risk management and oversight system, embedding good governance and principles deep into its financial service scenarios. Consequently, the quality of assets continues to show an improving trend.
On the one hand, CZBank systematically adjusted its business structure, establishing differentiated risk prevention strategies for key sectors such as real estate, strictly controlling the occurrence of non-performing loans from new business. On the other hand, the Bank persistently advanced its efforts in managing and resolving existing risks, further intensifying the disposal of non-performing assets and the provision for bad debts. As of the end of June 2023, the non-performing loan (NPL) ratio stood at 1.45%, a decrease of 0.02 percentage points from the end of the previous year. The provision coverage ratio reached 182.42%, an increase of 0.23 percentage points from the end of the previous year, thereby further bolstering the Bank's financial 'safety cushion'.
Industrial Securities noted in a research report, "In 2023, as CZBank intensified its efforts in the write-off and disposal of non-performing loans and reallocated its resources to non-cyclical assets. At the same time, the bank shifted its resources towards 'assets less sensitive to economic cycles.' The risk associated with new business ventures has decreased, the provision coverage ratio has gradually stabilized, and the rate of bad debt creation has dropped compared to previous periods. The quality of assets is on a path of improvement, enabling the bank to operate in a more agile and efficient manner."
CZBank made significant strides in bolstering its strategic investor base. The Bank rapidly developed a diversified capital structure that encompasses central state capital, local state-owned capital, and private equity. Additionally, it successfully executed rights offerings across both its A and H share classes, which has proven effective in augmenting capital reserves. This has been instrumental in fostering sustained and robust business growth. As of June's close, the capital adequacy ratio registered at 11.83%, while the core Tier-1 capital adequacy ratio was marked at 8.18%. These figures reflect an uptick of 0.23 percentage points and 0.13 percentage points, respectively, from year-end positions.
Exploring ethical financial practices: integrating core values into financial service scenarios
During the reporting period, CZBank intensified its commitment to elevating financial services with an ethical foundation. Realigning with its foundational mission, the bank has championed a paradigm shift by viewing finance through a societal value lens. Strategically, the bank's initiatives span four key areas: guiding principles, organizational alignment, client engagement, and operational mechanisms, all converging to establish an ethical financial framework..
Recently, CZBank unveiled its "CZBank Ethical Standard" evaluation framework. Integral to the Bank's ethical finance initiative, this framework moves beyond traditional customer risk assessments, emphasizing a customer's societal value contributions. This methodology has been integrated into processes including customer onboarding and credit evaluations.
The standard comprises two distinct evaluations: one tailored for corporations and another for individuals. For corporations, the criteria focus on four key areas: strategic responsibility, environmental stewardship, social accountability, and corporate governance, supplemented by a list of over twenty specific negative criteria. The individual evaluation centers on three primary dimensions: ethical conduct, ethical understanding, and ethical results, with an additional list of more than ten specific negative criteria.
Mr. Lu, the bank chairman, said, "Emphasizing a return to core financial principles with a primary focus on service, we've implemented a client-centric evaluation system that prioritizes positive behaviors and diminishes negative ones. This strategic approach enables us to identify and engage with top-tier clients, leadership, and projects from the outset. With these measurable criteria, we're consistently enhancing our client portfolio and their quality, strengthening the foundation for sustained high-quality growth and further fortifying our risk management framework."
CZBank, emphasizing its commitment to both political mandates and serving the public, has positioned itself at the forefront of financial advisory services, supporting supply-side structural reforms. As of now, the Bank spearheads an initiative involving over 3,400 financial advisors throughout the province. This effort has led to the servicing of more than 62,200 businesses and the facilitation of financing to the tune of 470.2 billion yuan. Concurrently, in its endeavor to merge tradition with technology, CZBank is pioneering a digital 'Gold-standard Advisor' program within the Linping Comprehensive Financial Service Demonstration Zone. This includes the launch of a digital management platform tailored for small and micro businesses, through which they have disbursed loans amounting to 4.72 billion yuan.
Deepening commitment in Zhejiang: leveraging intelligent operations for competitive advantage
In the upcoming half of the year, CZBank is focused on reinforcing its foundational growth, addressing operational vulnerabilities, and tackling underlying challenges to ensure sustainable, high-quality expansion. The bank has introduced a strategy centered around the smart integration of digital technologies. By adopting market-responsive products and utilizing advanced tools, the bank aims to design optimal financial service offerings. The primary objective is to enhance capital efficiency and achieve significant returns, all within a risk-managed framework. This positions the bank for a balanced growth trajectory, where scale, quality, and returns mutually reinforce each other.
CZBank has strategically prioritized the enhancement of seven pivotal business sectors by integrating intelligence-driven initiatives: revenue generation, collections, risk control, head office operations, customer acquisition, marketing, and overall management. A cornerstone of this approach is the Bank's head office emphasis on bolstering its reputation and influence within Zhejiang province. This is achieved by actively aligning with principal initiatives in the region. This strategy bore fruit in the first half of the year, with CZBank's financial services reaching an aggregate of 881.2 billion yuan in Zhejiang. The bank recorded an outstanding loan balance of 543.5 billion yuan, reflecting a year-on-year growth of 11.23%. Furthermore, CZBank's commitment to supporting key regional projects was evident, as it backed 43 major initiatives, culminating in a financing balance of 7.5 billion yuan – a substantial increase of 39% from the start of the year.
In our ongoing commitment for the current fiscal year, we anticipate marked growth across our loan portfolio within the province. Our focus remains on supporting an array of significant, high-profile projects locally. Moreover, our objective is to set a new benchmark for the total volume of our provincial financing services. Furthermore, CZBank has its sights set on a leading role in the underwriting of both local government bonds and debt from non-financial corporations.
In 2023, CZBank is set to embark on a transformative journey marked by accelerated growth, solidifying our operational foundation, and steering toward an elevated realm of high-quality development. As conveyed by CZBank's President, Zhang Rongsen, "Guided by our commitment as a responsible corporate entity, CZBank stands firm in our strategic pursuits, enhancing our core competencies, and harnessing our enterprising spirit. We will navigate this course using the 12-word operational philosophy as our guide, constructing a sturdy groundwork for our non-cyclical assets. This strategic approach will further fuel advancements in fundamental areas, propelling a synergistic growth pattern across our principal business sectors and culminating in the realization of our annual aspirations."