By BEIJING (Reuters) – China Minsheng Bank has cut pay by up to 50% for its Beijing branch employees, two people with direct knowledge of the matter said, in the biggest such move by a major commercial bank, in line with the country’s austerity drive.
The bank has also stopped paying for some work-related expenses and other benefits at its Beijing branch, the bank’s largest with more than 4,000 employees, as part of the broader salary cuts, one of the sources said.
The measures, which have not been reported previously, have been implemented across the board at the Beijing branch, said the source. It was not immediately clear if Minsheng Bank would implement these measures at its other branches.
The up to 50% pay cut is the largest such reduction at a major Chinese commercial bank in recent years.
Both the sources declined to be named as the information was not public.
Minsheng Bank and China’s banking sector regulator, the National Financial Regulatory Administration (NFRA), did not immediately respond to Reuters’ request for comment.
‘COMMON PROSPERITY’
The pay reduction fits with China’s “common prosperity” drive, which was launched in 2021 to address social and income inequality as growth slowed in the world’s second largest economy.
Financial firms in China, both state-owned and private, have implemented measures, including cutting salaries and bonuses, and asking staff not to wear expensive clothes and watches to work.
China Construction Bank (OTC:CICHF) Corp (CCB), the nation’s third largest commercial bank by assets, has asked employees at its headquarters to take a pay cut of at least 10%, Reuters reported in July.
China Merchants Fund Management, a top 10 fund manager, has asked senior executives to return pay received over the last five years that exceeds a new cap, Reuters reported earlier this month.
The pay cuts at Minsheng Bank also reflect profitability concerns as Chinese lenders come under pressure to lower lending costs to stimulate a economy that is verging on deflation and faces a prolonged property crisis.
Chinese banks’ net interest margin stood at 1.54% at the end of June, the lowest on record, official data showed.
Minsheng Bank is a second tier, joint stock bank. It had 7.7 trillion yuan ($1.1 trillion) in total assets at the end of last year, marking the 11th largest among China’s about 4,600 banking institutions.
Founded in 1996 as China’s first privately controlled commercial bank, Minsheng Bank has been hit hard by the nation’s ongoing property crisis.
The lender was a major creditor of China Evergrande (HK:3333) Group, which has been at the centre of the country’s property sector crisis. It has also been hit by the financial difficulties of developer China Oceanwide, one of the bank’s biggest shareholders.
In the first half of this year, Minsheng Bank’s net profit fell 5.5% year-on-year. Its non-performing loan ratio of real estate loans was 5.29% in the first half of this year, up from 4.92% in 2023.
($1 = 7.0530 Chinese yuan renminbi)