CITIC Bank's "Innovation Moment"

Source: Alpha Workshop

Push risk management to the forefront, move repairs ahead of growth, and China CITIC Bank (601998.SH/0998.HK) has also begun to reshuffle its operating priorities.

On March 20, the board of China CITIC Bank approved a 2025 profit distribution plan. The total annual cash dividend amounted to RMB 21.201 billion, accounting for 31.75% of net profit attributable to ordinary shareholders. Compared with the previous year, it increased by 1.2 percentage points.

Whether in terms of dividend amount or the payout ratio, it is the highest in the bank’s history.

But this is happening while operating revenue year-on-year is down by 0.55%.

In other words, management has a clear intent to strengthen shareholder returns with high dividends and stabilize market expectations.

By the end of 2025, China CITIC Bank’s core tier-1 capital adequacy ratio fell to 9.48%, down 0.24 percentage points year-on-year. It is above the 7.5% regulatory red line, but among the nine joint-stock banks whose annual reports have already been disclosed, it ranks in the middle-to-late positions.

Capital consumption from balance-sheet expansion, and high dividends, both reduce retained profit.

China CITIC Bank’s net profit growth rate of 2.98% lags behind the asset expansion growth rate of 6.28%. Its ability to accumulate internal capital has long been under pressure. With RMB 21.2 billion paid out as cash dividends, it means that the undistributed profits of the same scale cannot be transferred into core tier-1 capital.

Increasing the dividend payout ratio is, first of all, a market move. Joint-stock banks’ price-to-book ratios have long hovered in the historical low range of 0.6x to 0.8x. Bank valuation frameworks are increasingly dependent on key factors such as high dividend yields, low volatility, and stable performance.

At this point, raising dividends looks more like resetting its own valuation logic.

Chairman Fang Heying said at an earnings press conference that increasing dividends is “so that shareholders can genuinely share in the dividends of China CITIC Bank’s development.”

The bank’s secretary to the board of directors, Zhang Qing, also mentioned that last year China CITIC Bank released a valuation enhancement plan, formulated a package of measures to improve market value management, and is confident in promoting the return of China CITIC Bank’s value.

China CITIC Bank’s management is clearly aware that relying only on breakthroughs in scale and partial improvements in the statements will be difficult to win a higher market premium for joint-stock banks.

To stabilize investor expectations, shareholder returns still need to be made real.

But the issue is also evident here. With a core tier-1 capital adequacy ratio of 9.48%, the capital safety buffer is not especially wide. The more distributed, the less retained—meaning the capital space available in the future to digest real estate and retail risks will be tighter.

In 2025, the proportion of China CITIC Bank’s corporate real estate loans was reduced from its peak to 9.03%, but the real estate non-performing loan ratio rose against the trend by 0.46 percentage points to 2.67%.

On March 19, Longfor Properties (03380.HK) disclosed that a subordinate company had been taken to arbitration by China CITIC Bank due to a financing contract dispute. The amount of financing principal outstanding involved was RMB 3.699 billion. China CITIC Bank required Longfor Properties to assume joint and several liability for repayment.

The longer the suspension period, the less predictable the depletion of provisions. With China CITIC Bank’s asset size exceeding RMB 10 trillion and tight capital constraints, if the issue drifts into later periods and becomes a greater operating pressure, it will be even harder to control.

By the end of 2025, China CITIC Bank’s balance of non-performing loans in the real estate sector was RMB 7.955 billion, up by nearly RMB 1.7 billion from RMB 6.296 billion in the same period of 2024.

If that nearly RMB 3.7 billion debt is further confirmed as non-performing, China CITIC Bank’s non-performing loan ratio for real estate loans would also likely see a clear increase.

Retail assets have also entered a stage of systematic digestion. Among them, credit card business is the most worth watching.

By the end of 2025, China CITIC Bank’s credit card loan balances decreased by RMB 23.796 billion year-on-year, but non-performing loans still totaled RMB 12.118 billion. The non-performing loan ratio was 2.62%, up 0.12 percentage points from the end of the previous year.

Under pressure, China CITIC Bank has accelerated disposals and clearances on multiple fronts.

In December 2025, the Ningbo branch listed and transferred a personal consumer non-performing asset package through the National Equities Exchange and Quotations. The creditor amount was RMB 23.6027 million. The weighted average number of overdue days was as high as 1,767 days. More than 70% of the assets in the package had already entered the stage of litigation and enforcement. At the same time, China CITIC Bank became one of the first joint-stock banks to set up a Financial Asset Investment Company (AIC), opening a new funding and equity channel for the clearance of credit card non-performing assets.

At an earnings press conference on March 23, Deputy President Jin Xinian responded to questions about asset quality and risk disposal strategies. He said that in 2025, the bank would use more than 70% of its write-off resources to resolve retail risks, especially personal consumer loans and credit card business.

This statement is consistent with China CITIC Bank’s annual operating strategy of “adjusting the structure, consolidating long-term strengths, strengthening distinct characteristics, and focusing on key areas.” In the short term, retail business is no longer simply a profit engine; it is a risk segment that first needs to be repaired and stabilized.

This also indicates that China CITIC Bank follows a strategic prioritization in which risk disposal is pushed from the back end to the front end, and balance-sheet repair is placed above maximizing short-term profit.

The story of repairs is obviously not as attractive as growth. But what China CITIC Bank needs now is not someone who tells growth stories, but people who can support the repair process and even help shift gears.

In terms of recent additions of two deputy presidents at China CITIC Bank, Jin Xinian has both front-office business experience and a dual background in the risk line. He is familiar with core businesses such as investment banking and corporate finance, and also has a comprehensive oversight of credit approval and risk management. Zhao Yuanxin, meanwhile, has long focused on front-line work in branches such as Nanchang, Suzhou, and Shanghai. He has a deep understanding of how regional businesses are implemented and how credit granting discipline is enforced, making him a typical execution-oriented cadre.

What “repairs” ultimately comes down to is detailed implementation in areas such as branch-level approvals, post-loan inspections, unified credit granting, and bill management.

From February to March, the Nanning branch, Yinchuan branch, and Chengdu branch were each penalized for reasons including insufficient diligence in loan investigations, insufficient diligence in post-loan management, failure to unify credit granting for group customers, and violations in handling bill-related business. The loans were found to have seriously violated prudent operating rules, and loan management was not prudent, among other issues. Several current management personnel were warned.

This also, from the side, suggests that the lessons China CITIC Bank needs to address today are not only provisions and write-offs at the statement level, but also the tightening of execution systems in its branches and subsidiaries.

On one hand, increase dividends to stabilize market expectations; on the other, concentrate write-offs to take on retail risks. Meanwhile, reduce real estate loans, pushing old-cycle legacy issues into the collection and remediation stage. At the same time, by promoting risk-oriented and execution-oriented cadres into leadership, shift the organization’s focus from “making it bigger” to “making it more solid.”

First deal with old accounts, and then you can talk about new growth. More accurately, this is an operational restructuring carried out with a clear awareness of costs.

Whether the combination of high dividends and low capital buffer can be sustained depends on two lines: first, whether retail and real estate risks show signs of closing in by 2026; and second, whether subsequent capital supplementation can be achieved through external channels such as rights issues and perpetual bonds. Until then, China CITIC Bank will remain in a repair cycle where proactive clearing and passive pressure coexist.

The old growth logic of joint-stock banks is receding. In the future, what will truly widen the gap is not who can grow faster in scale, but who can converge the risk lines earlier—and, despite tight capital resources, rebuild a balance between growth and a margin of safety, handling the pain in a way that is closer to reality.

Investors who prefer banks should recognize in a timely manner that behind every narrative halo, repairs are the main operating line for joint-stock banks right now.

First deal with old accounts, and you can move into the new gear. Without risk clearing, new business cannot run on a light load. Without nurturing a new growth pole, the balance sheet after clearing risks falling into an inefficient loop.

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