Chinese megabanks will likely shift to half-yearly dividend payments following a regulatory push, though payout rates may remain stable over the next few years.
Industrial and Commercial Bank of China Ltd. (ICBC), the world's largest lender by assets, is projected to maintain its 2024 dividend-per-share at 31 Chinese fen, unchanged from 2023, according to estimates by S&P Global Visible Alpha. Bank of China Ltd. is also expected to keep its payout at 24 fen, with Agricultural Bank of China Ltd. and China Construction Bank Corp. projected to distribute 23 fen and 40 fen, all unchanged from 2023, based on Visible Alpha consensus estimates from at least three analysts.
Most major lenders received shareholder approval to implement twice-yearly dividend payments, following December 2023 guidance from the China Securities Regulatory Commission (CSRC). The regulator also simplified the dividend approval process to help companies adapt to the increased payment frequency.
"Their interim dividend plans were in response to CSRC's call for multiple dividends, in the hope of delivering more stable share price movement and encouraging long-term investment," said Iris Tan, a senior equity analyst at Morningstar. Despite the increase in payment frequency, payout ratios at the big four banks will remain unchanged at 30%, Tan added.
The four state-owned megabanks are operating in a challenging environment as they support the national goal of 5% GDP growth in 2024. The world's second-largest economy grew 5.0% in the first half, following 5.2% growth in 2023. But economists warn of challenges ahead, including a downturn in the housing market and a clouded export outlook due to an expected global economic slowdown.
"It will become standard practice [for major banks] to pay dividends semiannually if their financial performance is solid," said Ruoxi Sophy Zhao, a research analyst for dividend forecasting at S&P Global Market Intelligence. "We currently project a 1:1 split between interim and final dividends for major Chinese banks this year," Zhao noted, while "most banks will maintain a 30% payout," consistent with historical patterns.
During a press conference at the National People's Congress in early March, CSRC Chairman Wu Qing said the regulator would take "tough measures" against companies with no or low dividend payouts.
ICBC will likely pay an interim dividend of 14 fen per share, Zhao forecast, while China Construction Bank, Agricultural Bank of China and Bank of China are projected to pay 20 fen, 10.5 fen and 10 fen, respectively. The interim dividends will likely be announced with the banks' first-half results in late August and paid in mid-January 2025, Zhao said.
As of Aug. 16, US$1 was equivalent to 7.17 Chinese yuan.