After the personnel changes, initial signs of stabilization are emerging for ZHENGZHOU BANK

Under the background of balance sheet reduction, the banking industry is climbing uphill.

With tightening regulations and large banks sinking down, small and medium-sized banks are facing challenges in capital management, risk control, and building core competitiveness.

The predicament of Zhengzhou Bank reflects the growing pains of urban commercial banks in transformation.

As the first urban commercial bank in the country to be listed on both the A-share and H-share markets, Zhengzhou Bank has faced pressure in scale, quality, and shareholder returns over the past three years.

Recently, Zhengzhou Bank submitted its first financial report for the fiscal year 2024 after Chairman Zhao Fei took office, recording revenue and net profit attributable to shareholders of 12.877 billion yuan and 1.876 billion yuan, respectively, with year-on-year growth rates of -5.78% and 1.39%.

In the context of urban commercial banks that often see growth rates of 10% to 15%, this profit performance is not particularly impressive.

However, for Zhengzhou Bank, which has seen a significant shrinkage in profitability over the past two years, this achievement has rebounded by 25.01 percentage points compared to the same period last year, the highest increase among A-share listed urban commercial banks currently.

Personnel Changes in Place

Zhengzhou Bank, which has seen lackluster performance in recent years, once had its moments of glory.

During the rapid expansion from 2013 to 2016, it maintained revenue and net profit growth rates of over 25% and 15% for four consecutive years;

In 2015 and 2018, it successively listed on the Hong Kong Stock Exchange and the Shenzhen Stock Exchange, gaining significant attention.

During this period, Zhengzhou Bank's revenue and profits experienced fluctuations, but overall still showed a growth trend.

Until the economic cycle switched after the pandemic in 2020, Zhengzhou Bank's heavy exposure to real estate revealed risks, and the write-off of non-performing loans increased, leading to continued poor performance, with profitability in 2023 even lower than ten years ago;

The controversy over dividends caused by shrinking profits and declining capital replenishment ability has sparked widespread discussion in the capital market.

Looking back, the previous pursuit of scale while neglecting risk control was related to the economic cycle on one hand, and exposed the management team's loss of control on the other.

In 2024, former Chairman Wang Tianyu, who had led Zhengzhou Bank for 12 years, was expelled for multiple violations, including illegal loan issuance, with violations including "failure to perform duties correctly, causing adverse effects; engaging in power-for-money transactions, providing assistance to others in loan financing, etc."

In the year of his departure in 2023, Zhengzhou Bank had the highest non-performing loan ratio in the banking sector, with the non-performing loan ratio in the real estate industry reaching 6.48%, a year-on-year increase of nearly 60%.

With the new chairman and president in place, Zhengzhou Bank has initiated a new round of leadership team formation.

At the end of 2022, Zhao Fei, who had worked at the Agricultural Development Bank for over 20 years, was appointed to Zhengzhou Bank, and the following year he was promoted from president to chairman;

At the end of 2024, Li Hong, the deputy president of Postal Savings Bank's Beijing branch, was appointed to fill the president position that had been vacant for over a year, leading to a new round of personnel reshuffling.

In the first quarter of 2025, personnel changes at Zhengzhou Bank accelerated, with six senior executives leaving and two new appointments.

Among the former senior management team, three vice presidents and three assistant presidents left, including several "veterans" who had worked at Zhengzhou Bank for over 30 years; At the same time, Gao Rui was introduced from the Zhengzhou branch of Industrial Bank to serve as assistant president, and Pan Feng, the former director of the Board's Risk Management Office, was promoted to Chief Risk Officer.

Compared to the team of 10 consisting of the chairman, president, vice presidents, and assistant presidents at the beginning of 2022, only two "veterans," Vice President Sun Runhua and Assistant President Zhang Houlin, remain at Zhengzhou Bank now;

Chairman Zhao Fei, President Li Hong, and Assistant President Gao Rui are all "fresh blood" brought in from outside.

The redistribution of employee income and shareholder interests can indirectly confirm the new team's determination for reform.

In 2024, Zhao Fei positively responded to the executive salary cuts during the Q&A session of the performance meeting:

"Based on operating performance, executive compensation will be reduced by 10% annually over two years starting in 2024, while optimizing the salary distribution hierarchy, reallocating the adjusted salary resources to grassroots employees."

This figure has been exceeded, with the management's salary at the bank decreasing by 25.86% year-on-year in 2024.

Zhao Fei stated: "The company has continuously carried out 'tilting towards the front line, optimizing resource allocation' and 'reducing costs and increasing efficiency,' with total executive compensation reduced by over 10%, and the adjusted salary resources will be allocated to grassroots employees."

For example, based on market salary surveys, corresponding adjustments will be made to the salaries of positions with significant discrepancies from market levels;

This aims to enhance the incentive nature of wages and stimulate employee enthusiasm, ensuring equal promotion opportunities across all positions.

At the same time, Zhengzhou Bank has restarted its dividend plan after four years, distributing a cash dividend of 0.2 yuan (including tax) for every 10 shares to ordinary shareholders registered on the equity distribution date, with a dividend rate of 9.69%.

Zhengzhou Bank stated that the company's revenue level has been somewhat affected by factors such as narrowing interest margins; retained undistributed profits will help the bank further enhance its risk resistance capability; the retained undistributed profits will be used to supplement core Tier 1 capital, improving the capital adequacy level.

Stabilization Moment

The recovery in performance is the first proof provided by the Zhao and Li team.

In 2024, Zhengzhou Bank's revenue and net profit growth rates increased by 3.72 and 25.01 percentage points, respectively;

The profit growth not only achieved the first turnaround in three years but also recorded the highest increase among A-share city commercial banks during the same period.

Overall, in 2024, Zhengzhou Bank achieved growth in four key indicators: assets, deposits, loans, and profits, with performance beginning to improve.

Compared to financial institutions in Henan Province, two characteristics are evident:

First, it continues to expand its balance sheet amid the overall trend of credit contraction, with deposit and loan growth rates exceeding the provincial average by 3.26 and 0.74 percentage points, respectively;

Second, the efficiency of frontline work after resource tilting is at a high level.

By the end of 2024, the average assets per employee and average assets per outlet were 109 million yuan and 3.716 billion yuan, respectively, far exceeding the provincial averages of 6.7 million yuan and 990 million yuan at the end of 2023.

In response to the demand contraction during the economic downturn, Zhengzhou Bank has shifted its focus to incremental exploration.

For example, it aims to provide financial support for the county economy as a "growth pole" for regional economic services, opening up relevant channels Including online customer connection through mobile banking and offline development of rural acquiring merchants through the "Hui Nong Station+" scenario, bringing financial services closer to "between buildings and village entrances."

By 2024, the bank's agricultural service will cover 2,363 villages and towns, with the number of rural revitalization cards issued increasing by 86,600 compared to the end of the previous year.

Increase support for technology-based enterprises. Specific methods include improving the evaluation system, promoting online processes, and enriching the product shelf.

By the end of 2024, the balance of policy-based science and technology innovation financial loans will reach 48.269 billion yuan, an increase of 44.50% compared to the end of the previous year.

The incremental opening provides support for the overall expansion of Zhengzhou Bank's asset side.

In 2024, the growth rates of corporate and retail loans for the bank were 6.11% and 8.09%, respectively; among them, the growth rates of personal consumption loans and business loans were 38.8% and 9.23%, respectively.

At the same time, asset quality remains stable.

The non-performing loan ratio continues to decrease by 0.08 percentage points to 1.79%, and the provision coverage ratio increases to 182.99%, with risk compensation capabilities continuously strengthening;

The non-performing loan ratios of rapidly growing consumption loans and business loans decreased by 0.31 and 0.19 percentage points, respectively, maintaining stable quality.

The repair of asset quality is not achieved overnight; while the overall non-performing loan ratio decreases, hidden concerns also emerge.

For example, the non-performing risk in real estate continues to be exposed, with the non-performing amount reaching 2.123 billion yuan at the end of the year, an increase of 12.26% compared to the end of the previous year, and the non-performing loan ratio increasing by 3.07 percentage points to 9.55%;

The non-performing loan ratios in accommodation, catering, and agriculture, forestry, animal husbandry, and fishery are relatively high and still show a growing trend.

Zhao Fei stated that in the future, the focus of risk internal control will start from credit risk, advancing modularly to create a comprehensive risk management framework that extends horizontally and vertically.

Now, the new leadership team of Zhengzhou Bank has basically taken office.

Under the new team, whether Zhengzhou Bank can maintain a stable situation and regain growth momentum remains to be seen over time