China Minsheng Bank, which has assets of about CNY7,000 billion (USD1,087.1 billion), has reached CNY6,500 billion (USD1,009.4 billion) in liabilities. And the bank’s results have continued to plummet from last year to the first quarter of this year, raising market concerns.
Minsheng Bank’s results not only fell sharply last year, but also continued to contract sharply in the first quarter of this year, and these negative news and become the focus of market attention. Not long ago, there were rumors on the Internet that the bank would be taken over. Although Minsheng urgently dispelled the rumors, the bank’s significant shareholders subsequently signed an agreement to dissolve their concerted action.
Following the release of its 2020 annual report, Minsheng Bank’s operations have been under the spotlight of the market. According to PwC’s “China Banking Review and Outlook 2020” report released on April 22, Minsheng Bank recorded the largest decline in net profit for 2020 among the 38 Chinese banks listed on A and/or H shares in the report, with a 36% year-on-year drop.
The decline in Minsheng Bank’s profit did not stop after that, as the bank’s performance continued to fall in the first quarter of 2021, making it the only bank among listed mainland Chinese joint-stock banks to record declines in both revenue and net profit. Minsheng Bank recorded a net profit of RMB14.747 billion (US$2.29 billion, exchange rate 6.4393) in the first quarter, down 11.43% year-on-year, while the bank’s operating income was RMB43.072 billion (US$6.689 billion) in the first quarter, down 12.69% year-on-year.
While net profit continued to dive, Minsheng Bank’s total non-performing loans continued to rise. According to Minsheng Bank’s 2020 annual report, as of the end of December 2020, Minsheng Bank’s total non-performing loans amounted to RMB 70.049 billion (approximately US$10.878 billion), an increase of RMB 15.615 billion (approximately US$2.425 billion) or 28.69% at the end of 2019, and the non-performing loan ratio was 1.82%, up from the end of 2019 by 0.26 percentage points.
According to its annual report for the first quarter of this year, the bank’s total non-performing loans continued to rise, recording RMB72.106 billion (about US$11.198 billion) during the period, up another RMB2.057 billion (about US$319 million) from the end of 2020.
While profits dived, Minsheng Bank’s share price also started to go all the way down, with the A-share price falling to a six-year low. As of May 17, Minsheng Bank’s A-share price has fallen from RMB5.27 (~$0.82) on March 30 to the current RMB4.69 (~$0.73).
The investment bank JPMorgan Chase recently issued a research report, maintaining a “hold” rating on Minsheng Bank and lowering its target price for its H shares by 15% to HK$3.9 (about US$0.5).
On April 21, the news of “Minsheng Bank being taken over” suddenly spread in WeChat group. Although Minsheng Bank urgently dispelled the rumors, on the evening of the 29th, at the same time as Minsheng Bank released its first financial report for 2021, Minsheng made another announcement, announcing that the bank’s shareholders, China Life Insurance Co. Ltd. (“Dongfang”) and Dongfang Group Limited (“Dongfang Limited”), and signed the “Agreement of Dissolution” respectively.
After the signing of the agreement, Huaxia Life will no longer have any acting in concert arrangement with Dongfang and Dongfang Limited.
According to the announcement, before the dissolution of the agreement, China Life held 4.91% of Minsheng Bank’s equity, Dongfang held 2.92% and Dongfang Limited held 0.08%, and the three held a total of 7.91% of Minsheng Bank’s equity.
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