Bank of Communications Annual Report Released: Dividend payout ratio has exceeded 30% for 12 consecutive years, net profit growth, and non-performing loan ratio decreased

On March 27, Bank of Communications released its 2023 annual report. The annual report shows that during the reporting period, the bank's net profit attributable to shareholders of the parent company was RMB 92.728 billion, an increase of 0.68% year-on-year; it achieved operating income of RMB 257.595 billion, a year-on-year increase of 0.31%. As of the end of the reporting period, the bank's total assets reached RMB 14.06 trillion, an increase of 8.23% from the end of the previous year. In 2023, the Bank of Communications' board of directors recommended a cash dividend of RMB 0.375 per share of common stock, totaling RMB 27.849 billion, accounting for 32.67% of net profit. This marks the 12th consecutive year that the bank's cash dividend payout ratio has remained above 30%. Additionally, the unexpected increase in Bank of Communications' second largest shareholder, HSBC, last year has also attracted attention. Non-interest Income Grows Against the Trend The annual report shows that in 2023, Bank of Communications achieved a total profit of RMB 99.698 billion, an increase of RMB 15.83 billion year-on-year, with a growth rate of 1.61%. The bank's profit growth mainly came from a year-on-year increase in non-interest net income and a year-on-year decrease in credit impairment losses. During the reporting period, non-interest net income increased by 7.55% year-on-year, while credit impairment losses decreased by 5.80% year-on-year. As for net interest income, Bank of Communications achieved net interest income of RMB 164.123 billion last year, accounting for 63.61% of net operating income, a decrease of RMB 5.759 billion from the previous year, down 3.39% year-on-year. The annual report explains that the year-on-year decrease in net interest income is mainly due to multiple reductions in the loan market quoted interest rate (LPR) and adjustments to the interest rates of existing home loans. The decrease in average customer loan yield led to lower-than-expected growth in interest income. At the same time, the continued trend of RMB deposits becoming more term-oriented, coupled with the upward impact of foreign currency liabilities' costs, led to an increase in interest expenses. Decline in Non-Performing Loan Ratio, Increase in Overdue Ratio Regarding asset quality, as of the end of the reporting period, Bank of Communications' overall non-performing loan balance was RMB 105.688 billion, an increase of RMB 7.162 billion from the end of the previous year; the non-performing loan ratio was 1.33%, a decrease of 0.02% from the end of the previous year. Meanwhile, during the reporting period, the company's overdue loan balance was RMB 62.273 billion, an increase of RMB 15.964 billion from the end of the previous year, with an overdue loan ratio of 1.20%, up by 0.22 percentage points from the end of the previous year. The individual overdue loan balance was RMB 47.832 billion, an increase of RMB 9.349 billion from the end of the previous year, with an overdue loan ratio of 1.93%, up by 0.30 percentage points from the end of the previous year. He Zhaobin, the secretary of the Bank of Communications' board of directors, stated at the performance release conference that the bank's overdue loan total increased by RMB 25.292 billion compared to the beginning of the year, reflecting the current challenges and pressures faced in risk control. He Zhaobin believes that although there are various pressures and challenges on asset quality, as the effects of national regulatory policies gradually become apparent and top-down risk mitigation measures in key areas become more practical and effective, he is confident that the positive trend of economic recovery this year will further consolidate and strengthen. With continued improvement in social expectations, gradual effectiveness in risk mitigation in key areas, and steady improvement in repayment capabilities of enterprises and residents, these factors will all contribute to a positive push towards overall improvement in the bank's asset quality Meanwhile, Bank of Communications (BOCOM) is continuously improving its comprehensive risk management system, optimizing credit management processes, enhancing various risk management capabilities, and strengthening the resolution of risks in key areas. "We are confident in maintaining stable and improving asset quality throughout the year," said He Zhaobin. Confident in maintaining stable performance and dividend payout ratio In 2023, the board of directors proposed a cash dividend of RMB 0.375 per share for ordinary shares, totaling RMB 27.849 billion, accounting for 32.67% of net profit. Currently, BOCOM's A-share and H-share dividend yields are close to 6% and 8% respectively. He Zhaobin, the secretary of the board of directors of BOCOM, stated that since 2012, the cash dividend payout ratio of BOCOM has been maintained at above 30% for 12 consecutive years (2012-2023 fiscal years). The latest dividend proposal has slightly increased compared to the previous year. Regarding the dividend policy, despite facing some challenges in operations, there is confidence in maintaining overall performance and dividend payout ratio stability, allowing shareholders to continue sharing the results of BOCOM's business development. HSBC Holdings increases its holdings of 19,300 shares of BOCOM A shares in the fourth quarter On the shareholder front, according to the annual report, in the fourth quarter of 2023, the second largest shareholder of BOCOM, HSBC Holdings, increased its holdings by 19,300 shares of BOCOM A shares. As of the end of 2023, according to BOCOM's shareholder registry, HSBC Holdings holds 19,300 shares of BOCOM A shares and 13.886 billion shares of H shares