Yunnan Agricultural Bank Cuts Staff to Preserve Profits Amid 30% Rise in Overdue Loans and Leadership Changes

In the first half of the year, the bank achieved a total operating revenue of 14.673 billion yuan, a year-on-year decrease of 1.3%; and a net profit attributable to the parent company of 7.561 billion yuan, a year-on-year increase of 6.18%.

Firstly, let's analyze the reasons for the decline in revenue.

The main reason is still the decrease in main business income. In the first half of 2024, the bank's interest income was 23.732 billion yuan, a year-on-year decrease of 1.462 billion yuan, a drop of 5.80%, and the reason is naturally due to the downward trend in interest rates.

However, looking at the annual reports of listed banks in the first half of the year, many banks have driven the growth of interest income through scale factors. Obviously, the scale factor of Chongqing Rural Commercial Bank was not enough to offset the interest rate factor.

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Despite the interest expense of 12.651 billion yuan, a year-on-year decrease of 499 million yuan, a drop of 3.80%, it also failed to stop the decline in net interest income. In the first half of the year, the net interest income was 11.081 billion yuan, a year-on-year decrease of 963 million yuan, a drop of 7.99%.

In the first half of this year, there is also a characteristic of listed banks, that is, due to the bond "bull market", many banks have relied on the growth of non-interest income to pull up the increase in revenue. The net non-interest income of Chongqing Rural Commercial Bank has indeed increased significantly, achieving a net non-interest income of 3.592 billion yuan, a year-on-year increase of 770 million yuan, a growth rate of 27.27%, and its proportion of total operating income is 24.48%, an increase of 5.50 percentage points year-on-year.

Among them, the net income of fees and commissions, which represents intermediate business, has inevitably decreased, with a net income of 899 million yuan, a year-on-year decrease of 94 million yuan, a drop of 9.44%. The driving force for non-interest income is other non-interest income. In the first half of the year, the bank achieved other net non-interest income of 2.693 billion yuan, a year-on-year increase of 863 million yuan, a growth rate of 47.19%.

Although the growth rate of net non-interest income is not low, it is not the main business after all, and due to the proportion issue, the total operating income still declined.

Next, let's analyze why profit growth can be achieved. In the past, the means for banks to save taxes and fees were nothing more than reducing provisions and reducing income tax expenses, but this time Chongqing Rural Commercial Bank achieved it by saving employee expenses and reducing income tax expenses.

In the first half of the year, the bank's business and management expenses were 3.701 billion yuan, a year-on-year decrease of 937 million yuan, a drop of 20.21%. In the analysis of business management expenses, the bank seems to be avoiding the heavy and emphasizing the light. The bank stated, "The group continues to improve the level of refined management. Among them, actively optimize resource allocation, take multiple measures to reduce costs and increase efficiency, other general and administrative expenses of 1.182 billion yuan, a year-on-year decrease of 158 million yuan, a drop of 11.76%." However, the main explanation for reducing business and management expenses is somewhat understated, "In addition, optimize and adjust the supplementary medical insurance plan, and the corresponding cost of employee actuarial calculations has decreased."In reality, the cost of employees in this sector has decreased significantly, by more than 20%, with a reduction of 26.87%. Among these, employee salaries, bonuses, and allowances have dropped by 23.18%. Whether adjusting the supplementary medical insurance plan can lower such a large margin, "Global Finance" remains skeptical.

It is unknown to the outside world whether the bank has reduced salaries, but staff reduction is certain. In the first half of this year, there were 14,592 employees on duty, a decrease of 254 people compared to 14,846 people in the same period last year.

Branches have also contracted. In the first half of this year, there were 1,743 branches, a reduction of 11 compared to 1,754 branches in the same period last year; among them, there were 1,542 sub-branches, a reduction of 17 compared to 1,559 sub-branches in the same period last year.

The decrease in business and management expenses reversed the trend of operating profit, achieving a slight increase, and coupled with a nearly 40% decrease in income tax expenses, it ultimately led to an increase in net profit.

Restructuring and overdue growth

On the surface, the asset quality of Chongqing Rural Commercial Bank is acceptable. In the first half of the year, the non-performing loan ratio of Chongqing Rural Commercial Bank was the same as at the end of last year, with no increase, and the level of 1.19% is not too bad. The provision coverage ratio of 360.29% only slightly decreased from the end of last year, with the overall level remaining the same.

However, looking further, the potential risks of the bank's asset quality are not low.

Although the non-performing rate decreased in the first half of the year, the balance of non-performing loans increased, and the growth of loans in the watch, substandard, and loss categories, as well as the migration rates of watch, substandard, and doubtful categories, increased. This means that the risks of future non-performing loans and write-offs are relatively large. In the first half of the year, the bank wrote off 2.501 billion yuan. The provisions can still be maintained at a high level, which is related to the bank's continued large-scale provision for provisions, with an impairment loss of 2.462 billion yuan, an increase of 617 million yuan year-on-year, an increase of 33.41%. Among them, the impairment loss of customer loans and advances increased by 1.165 billion yuan year-on-year, a year-on-year increase of 85.06%. The bank explained that this was mainly because the group realized a large amount of disposal and recovery of non-performing assets in the same period last year, accounting for 70.76% of the annual proportion, and the base of impairment loss was relatively low.

The data on restructuring and overdue loans are also not very good. As of the end of June, the balance of restructured loans was 3.151 billion yuan, an increase of 2.536 billion yuan from the end of last year. The total amount of overdue loans was 10.745 billion yuan, an increase of 1.141 billion yuan from the end of last year; it is particularly worth noting that the bank has a relatively large amount of new overdue loans, an increase of 32.96% compared to the end of last year.

In terms of asset quality, Chongqing Rural Commercial Bank also has some differences from the overall listed banks. From the semi-annual reports of listed banks, overall, the non-performing loan ratio of corporate loans of listed banks has decreased, while the non-performing loan ratio of retail loans has increased. However, Chongqing Rural Commercial Bank is the opposite, with its corporate loan non-performing loan ratio increasing and retail non-performing loan ratio decreasing.It can be said that the current moment is a critical juncture in the development of Chongqing Rural Commercial Bank (CQRCB), and overcoming it will usher in another period of brilliance.

At this time, the bank's chairmanship also happens to be undergoing a change. As previously mentioned, Xie Wenhui has resigned, and the new leader is currently in a transitional phase.

In the resignation announcement of Xie Wenhui, it was mentioned that Xie Wenhui has served as the deputy secretary of the party committee and president of the bank since 2013, and as the secretary of the party committee and chairman of the bank since 2022. The announcement expressed affirmation for Xie Wenhui's work.

The deputy bank president mentioned earlier, who was dismissed from both his position and party membership, is Shu Jing. Concurrently, on March 28th, the resolution of the 41st meeting of the fifth board of directors dismissed Ms. Shu Jing from her position as deputy bank president.

Also in March, Zhang Jin was newly appointed as deputy bank president. Currently, the bank's senior management structure is "one president and four deputy presidents."

The market is quietly observing when the new chairman of the bank will be finalized.