Ping An Bank with enough capital for proposed higher dividends: analyst

The China-based bank has proposed to pay a 30% dividend in 2023.

Ping An Bank has enough capital to cushion the impact of its proposed higher dividends and will likely maintain a stable performance, according to S&P Global Ratings.

The China-based bank has proposed to pay a 30% dividend in 2023– up from the 10% to 15% range that it has been paying out over the past five years.

“In our view, the China-based bank has the capital cushion to absorb the impact of a higher dividend,” S&P wrote in a commentary.

PAB could improve its capitalization over the next one to two years if loan growth remains tepid amidst weak economic conditions, the ratings agency further noted.

ALSO READ: Are ATM cash withdrawals making a comeback?

However, it warned that the economic confidence in China in the near term will likely prevent overly aggressive loan growth for the bank. PAB's loan growth was 2.4% in 2023, amidst lackluster consumer sentiment, reducing capital consumption for the bank, S&P noted.

Overall, PAB’s profitability is expected to be in line with that of comparable peers over the next 12 to 24 months. The bank's reported return on average assets was 0.85% in 2023, down 4 basis points (bps), but better than the industry average of 0.7%. 

PAB also reported lower credit costs– reducing it by 16 bps– which helped mitigate pressure on lower margins and income. Net interest margin was down 37 bps in 2023, and fees and commissions income fell by 2.6%, according to S&P.

ALSO READ: Strong liquidity, moderate risk to prop up Gunma’s “weak yet improving” profits

“PAB's stable performance will support the wider group's long-term strategy of providing integrated financial services. We expect the bank to remain a key contributor to the parent group's financials. This underpin our view of PAB being a highly strategic part of the group,” S&P concluded.