At the end of Q3 this year, China Everbright Bank (CEB) saw its shareholder count surge by 40,000 compared to June. However, the bank reported declines in both revenue and net profit for the first three quarters, with Q3 alone posting double-digit drops. Amid a shrinking net interest margin (NIM) and a sharp decline in non-interest income, CEB’s weak Q3 performance comes as no surprise.
Once hailed as the "Whampoa Military Academy" of the banking sector—a nod to its reputation for grooming top financial executives—CEB has increasingly lagged behind its peers. Over the past decade, the bank has produced numerous high-profile bankers, yet its financial performance has stagnated. This year, both revenue and net profit fell in the first three quarters, with Q3 declines exceeding 10%.
Currently, CEB’s price-to-book (P/B) ratio stands at just 0.41, ranking second-lowest among listed joint-stock banks, trailing only Huaxia Bank (0.36) and China Minsheng Bank (0.32). While this may seem like a bargain, chasing the cheapest stocks—much like buying the cheapest vegetables—often leads to frustration rather than satisfaction.
Adding to investor frustration is the bank’s delayed mid-term dividend plan, which remains unfulfilled despite earlier promises.
**1. Net Interest Income Dominates, But Pressures Mount** In the first three quarters, CEB’s operating revenue fell 7.94% year-on-year (YoY) to RMB 94.27 billion, while net profit attributable to shareholders dropped 3.63% to RMB 37.018 billion. Net interest income declined 5.11% to RMB 68.881 billion, and non-interest income plummeted 14.83% to RMB 25.389 billion.
Q3 alone saw revenue slide 13.01% to RMB 28.352 billion and net profit drop 10.99% to RMB 12.396 billion. Net interest income fell 4.21% to RMB 23.449 billion, while non-interest income cratered 39.56% to RMB 4.903 billion. With NIM under persistent pressure and non-interest income battered, CEB’s Q3 struggles were inevitable.
In H1, CEB’s NIM narrowed to 1.4%, down 0.14 percentage points from end-2023, a 9.09% contraction. Meanwhile, total loans grew just 3.82% to RMB 4.084 trillion. The sluggish loan growth failed to offset the NIM squeeze, dragging down net interest income.
Notably, net interest income accounted for 73.06% of total revenue in the first three quarters—the highest among A-share joint-stock banks—making CEB particularly vulnerable to NIM pressures.
Fee and commission income rose 2.18% YoY to RMB 15.502 billion in the first three quarters, with Q3 alone up 9.05% to RMB 5.059 billion.
**2. Vanishing Mid-Term Dividends** CEB’s stock has underperformed this year, closing at RMB 3.46 on November 4, up 1.47% for the day but still below its December 31, 2023 close of RMB 3.69. Its trailing P/E ratio is 4.83, and its P/B of 0.41 ranks second-lowest among peers, ahead only of Huaxia Bank (0.35).
After six consecutive quarters of decline, CEB’s shareholder count unexpectedly jumped by 40,000 in Q3 to 180,200—a 28.23% surge, nearing mid-2023 levels. These new investors may have sought a bargain, but cheap stocks often bring more headaches than gains.
Worse, CEB has yet to announce its 2025 mid-term dividend plan. In 2024, the bank introduced mid-term dividends, paying RMB 0.104 per share (totaling RMB 6.145 billion) alongside its Q3 report on October 31. This year, management pledged to finalize a mid-term dividend plan but has since gone silent. With a new board election looming, hopes for a payout under the current leadership are dim.
**3. Bond Market Blues** Beyond NIM and fee income, Q3’s biggest blow came from bond market volatility. As NIM pressures and slower loan growth squeezed profits, bond investments had become a key earnings driver—especially during the 2022–2023 bond rally.
CEB ramped up its trading securities portfolio to RMB 149.237 billion in H1, up 16.14% from end-2023, far outpacing loan growth. But this backfired as bond prices fell: H1 fair-value losses hit RMB 1.907 billion, ballooning to RMB 4.982 billion in Q3—second only to China Merchants Bank’s RMB 8.827 billion loss.
CFO Zhang Xuyang attributed the slump to rising bond yields and high YoY comparables from 2023’s rate declines. The bank vowed to optimize its portfolio to stabilize coupon income and rebound in Q4.
**4. A Revolving Door at the Top** CEB’s "Whampoa" nickname reflects its role as a stepping stone for executives. Current President Hao Cheng, appointed in July 2023, is the bank’s seventh leader in a decade—averaging under two years per tenure. Most CEB presidents hail from state-owned banks, using the role as a springboard to higher posts.
For instance: - Zhao Huan (2014–2016) moved from CCB to CEB, then to ABC as president. - Zhang Jinliang (2016–2018) shifted from BOC to CEB, later leading Postal Savings Bank and now CCB. - Ge Haijiao (2018–2019) left for a vice-governor role and now chairs BOC. - Liu Jin (2020–2021) departed for BOC after just over a year. - Fu Wanjun (2021–2023) exited for ABC. - Wang Zhiheng (2023–2024) lasted just a year before joining ABC.
Hao Cheng, formerly of Bank of Communications, has now held the post for 16 months—a relative marathon by CEB standards.
Comments