Involving billions in agency fees, PSBC announces key resolutions for shareholders' meeting!

The highly anticipated pricing scheme for postal group agents to absorb savings agent fees from Postal Savings Bank of China was recently disclosed.

On the evening of October 9th, Postal Savings Bank of China disclosed the materials for the 2024 first extraordinary general meeting of shareholders of China Postal Savings Bank Co., Ltd.

This includes a proposal to adjust the pricing of savings agent fees for Postal Savings Bank and postal group agents in the deposit absorption business.

Previously, the savings agent fees paid by Postal Savings Bank to the postal group were almost in the hundreds of billions annually, so the extent of this scheme's reduction and its actual impact have attracted considerable attention.

It can be said that this has caused quite a stir.

Triggering Pricing Adjustment Clauses

The relevant shareholder meeting documents show that the reason Postal Savings Bank intends to adjust the savings agent fees this time is that, according to agreements signed between Postal Savings Bank and the postal group, the clauses related to the passive adjustment of pricing for agent absorption of RMB deposits have been triggered.

In addition, the LIBOR used for pricing savings agent fees for agent branches handling foreign currency savings business has also expired, requiring further negotiation to determine new terms.

Specific Plan

The proposal shows that Postal Savings Bank and the postal group have jointly negotiated to optimize and adjust the pricing of domestic and foreign currency savings agent fees.

The adjustment of the tiered fee rates this time mainly considers the changes in market interest rate levels in recent years, the importance and interest rates of different tiers of agent savings deposits, and the guidance on deposit absorption behavior of agent branches.

The tiered fee rates for agent savings deposits with a term of three years or less have all been reduced, including:

(1) For deposits with a term of less than one year (excluding one year), the higher the tiered fee rate, the greater the reduction in this adjustment. The tiered fee rates for demand deposits, time deposits with notice, three months, and six months have been reduced by 33.8BPs, 19.8BPs, 22.5BPs, 16.5BPs, and 14.9BPs respectively.

(2) For fixed-term deposits with a term of one year or more, considering that the interest rate for one-year deposits has a relative advantage and a higher proportion of one-year deposits, which plays an important role in consolidating core deposit positions, maintaining customer stability, improving the matching of deposit and loan terms, and preventing liquidity risks, the tiered fee rate for one-year deposits is proposed to be reduced by 10.1BPs. The interest rates for two-year and three-year deposits are higher than one-year deposits and account for a lower proportion in deposits, so their tiered fee rates are proposed to be reduced by 20.1BPs and 8.0BPs respectively.

The specific adjustment plan is as shown in the figure.

Significant Impact on Net Profit

After the adjustment of agent fees and the implementation of the scheme, it may have a significant impact on the net profit of Postal Savings Bank.

The scheme shows that in terms of comprehensive rates, based on the 2023 agent savings deposits, calculated based on the adjusted tiered fee rates, the comprehensive fee rate for Postal Savings Bank in 2023 will decrease from 1.24% to 1.08%, a decrease of 16BPs; the savings agent fees will decrease from 115.623 billion yuan to 100.565 billion yuan, a decrease of 15.058 billion yuan **

It is worth noting that in 2023, PSBC's non-deductible net profit was 86.2 billion. The impact on profits can be seen once this new plan is implemented.

Plan Effective After Shareholders' Meeting Approval

In addition, the adjusted tiered fee rates will take effect from the date of approval at the shareholders' meeting.

After negotiations between PSBC and China Post Group, it was agreed that the savings agency fees from July 1, 2024, to the date of approval at the shareholders' meeting will be settled according to the adjusted tiered fee rates.

Precedents Exist

The passive adjustment clause agreed upon by PSBC and China Post Group was triggered in 2022.

This year, the relevant clause was triggered again.

On March 29, 2024, after the announcement of the annual performance of the four major banks in 2023, the average net interest margin of the four major banks was 1.44%, lower than the lower limit of the passive adjustment set at 1.64% after the reset in 2022, triggering the passive adjustment once again.

At that time, the announcement stated that in recent years, the net interest margin and net profit margin of the banking industry have continued to narrow. Against the backdrop of the passive adjustment triggered by the pricing of RMB deposit savings agency fees, and considering the current and future interest rate environment and trends, PSBC and China Post Group actively negotiated. From the perspective of the interests of all shareholders, they intend to further reduce the tiered fee rates for agency savings deposits, in order to continuously optimize the structure of PSBC's agency savings deposits, reduce interest costs, enhance active liability management capabilities, promote the long-term healthy development of agency savings deposit business.

Regardless, if this plan can be smoothly passed, it will have a positive impact on PSBC's future profits