Bank of Zhengzhou Co., Ltd. has once again decided against distributing dividends for the 2025 fiscal year. What are the reasons behind this decision?
On March 30, 2026, the bank's board approved a profit distribution plan for 2025 that proposes no cash dividend, no bonus shares, and no capital reserve conversion. This marks a return to non-distribution after the bank paid a dividend of 9.69% in 2024, following four consecutive years (2020-2023) without dividends. The bank stated that retaining undistributed profits helps strengthen the capital foundation for high-quality development, enhances risk resilience, and provides strong support for operational stability.
This decision appears unusual compared to peers, especially as many banks announced dividend ratios exceeding 30% during the recent listed bank earnings season, with some even embedding a "minimum annual cash dividend ratio of 30%" into their corporate charters. Banks are traditionally leaders in dividend distributions within the capital markets. In 2024, 42 A-share listed banks distributed over 600 billion yuan in total dividends, accounting for 27% of the entire A-share market's payout. In 2025, among the 22 banks that have disclosed their financial reports, 21 collectively distributed over 580 billion yuan in dividends, an increase of tens of billions year-on-year.
There is no fixed standard for whether or how much a listed company should distribute in dividends in a given year; it can be decided based on its own operational strategy. Analyzing Bank of Zhengzhou's annual performance may provide deeper insight into its dividend choices.
The bank's dividend history shows dramatic fluctuations: it resumed payouts only after new regulations were introduced and halted them again after avoiding ST risk. From 2020 to 2023, despite being profitable for four consecutive years, the bank did not distribute any cash dividends, making it the only A-share listed bank with such a record and earning it the "iron rooster" label from investors. This naturally sparked dissatisfaction, leading the China Securities Investor Services Center to send a shareholder inquiry letter questioning the rationality of its dividend policy.
During the 2023 shareholders' meeting, the zero-dividend proposal faced opposition from 83.1% of H-share voters. However, with approximately 90% of A-share shareholders supporting the motion, the proposal passed despite significant H-share opposition.
A turning point came in April 2024 when revised regulations under the "New National Nine Articles" stipulated that profitable companies with positive retained earnings would face "other risk warnings" if their cumulative cash dividends over the past three years were less than 30% of their average annual net profit and below 50 million yuan. Facing potential ST designation as the first listed bank with such a status if it continued its zero-dividend policy for 2024, Bank of Zhengzhou announced a dividend plan in March 2025 for the 2024 fiscal year: a cash dividend of 0.2 yuan per share, totaling approximately 182 million yuan, with a payout ratio of just 9.69%. While this met regulatory requirements, it was significantly below the industry average. The bank explained that this balanced shareholder returns with business development needs, retaining as much capital as possible to supplement capital while complying with regulations.
However, just one year later, the bank proposed another zero-dividend plan for 2025, citing the need to retain earnings for capital strength and risk resilience. It emphasized that, amid stricter financial regulation and intensified capital constraints, profit retention is the most effective way to ensure adequate capital levels.
Following the announcement, a user on Sina Blog expressed disappointment, stating that two key expectations—recovery of funds from a won lawsuit and the 2025 dividend—were not met. The user decided to liquidate their position in Bank of Zhengzhou, citing a lack of short-term catalysts.
A core reason behind the repeated non-distribution revolves around capital replenishment. The bank has indicated that for small and medium-sized banks, external capital supplementation channels are limited, making internal profit retention a crucial method for maintaining adequate capital levels, especially core tier-1 capital. Retained earnings are thus used to supplement core tier-1 capital, alleviating capital pressure and supporting long-term investor interests.
As of the end of 2025, Bank of Zhengzhou's core tier-1 capital adequacy ratio stood at only 8.45%, down 0.25 percentage points from 2024. This marks the third consecutive annual decline, leaving it less than one percentage point above the 7.5% regulatory minimum. Its tier-1 capital adequacy ratio was 10.44%, and total capital adequacy ratio was 11.71%, both also declining. Compared to industry averages—where the banking sector's core tier-1, tier-1, and total capital adequacy ratios were 10.92%, 12.37%, and 15.46%, respectively, at the end of Q4 2025, and city commercial banks averaged 12.39%—Bank of Zhengzhou lags significantly.
Among the 22 A-share banks that have released 2025 reports, Bank of Zhengzhou ranks second-lowest in core tier-1 capital adequacy, fourth-lowest in tier-1 capital adequacy, and lowest in total capital adequacy, highlighting the urgency of capital supplementation.
The bank faces multiple constraints in capital replenishment channels. As a city commercial bank, its equity financing options are limited; it has not conducted any equity refinancing since 2020. The cost of issuing tier-2 bonds continues to rise, with a coupon rate of 4.5% in 2025, up 0.8 percentage points from 2023. Thus, profit retention remains the most practical choice, explaining the zero-dividend decision.
Concurrently with the 2025 non-distribution announcement, the bank disclosed plans to allocate 707 million yuan to general risk reserves and 188 million yuan to statutory surplus reserves, with remaining undistributed profits carried forward to supplement core tier-1 capital. This "profit for capital" strategy effectively boosts capital adequacy in the short term but struggles to balance immediate shareholder returns with long-term interests.
Beyond capital pressure, asset expansion and profitability challenges also influence the dividend policy. By the end of 2025, the bank's assets reached 743.674 billion yuan, up 9.95% year-on-year, the highest growth rate since its 2018 listing. Since 2018, assets have grown 59.54%, intensifying capital consumption and increasing the need for replenishment.
Operationally, the bank reported revenue of 12.921 billion yuan, up 0.34% year-on-year, and net profit attributable to shareholders of 1.895 billion yuan, up 1.03% in 2025. However, this represents a low-base recovery after a period of negative growth; both figures remain below 2023 revenue (13.667 billion yuan) and 2022 net profit (2.422 billion yuan) levels. Furthermore, growth in revenue and profit lags far behind asset expansion, weakening dividend capacity.
The bank's revenue sources are relatively concentrated. Net interest income was 10.864 billion yuan in 2025, up 4.82% year-on-year, accounting for 84.08% of total revenue, indicating high reliance on traditional lending. Non-interest income constituted only 15.92% of revenue, totaling 2.057 billion yuan, down 18.13% year-on-year, with fees and commissions net income falling 13.95% due to declines in wealth management, fund management, and underwriting businesses.
Asset quality showed some improvement: the non-performing loan ratio was 1.71% at end-2025, down 0.08 percentage points, and the loan loss provision coverage ratio was 185.81%, up 2.82 percentage points. While these metrics are better than the city commercial bank average, they still trail the overall banking sector average, indicating room for enhanced risk resilience.
Notably, shortly before the 2025 Lunar New Year, President Li Honggang, who had been in the role for just over a year after moving from Postal Savings Bank's Beijing branch, resigned for personal reasons. The bank's current executive team includes Chairman Zhao Fei, Board Secretary Han Huili, Vice President Sun Runhua, two Assistant Presidents (Zhang Houlin and Gao Rui), Chief Risk Officer Pan Feng, and Joint Company Secretaries Han Huili and Wei Weifeng. The vacancies in key positions such as President and Vice President are unusual for a listed bank with 700 billion yuan in assets.
For this city commercial bank, which has faced years of controversy over dividends, finding a balance between strengthening capital, optimizing operations, improving governance, ensuring stable business development, and providing reasonable shareholder returns remains a critical challenge. Success in this endeavor will determine whether it can shed the "iron rooster" label and achieve sustainable, high-quality development.
Comments