BANK OF GANSU (02139.HK), a city commercial bank listed in Hong Kong, has sparked market debate with an unprecedented dividend distribution. According to the bank's 2025 profit distribution plan, it intends to pay a cash dividend of 1.18 yuan per 10 shares (tax inclusive), totaling 1.778 billion yuan. This amount represents 302% of the bank's 2025 net profit attributable to the parent company's shareholders, far exceeding conventional industry levels.

This marks only the second cash dividend plan by BANK OF GANSU since its 2018 Hong Kong listing. Previously, the bank had not paid dividends for six consecutive years, earning it the market label of being overly conservative. With local state-owned entities holding over 60% of its shares, this substantial dividend is widely interpreted as a response to the demands of these major state-owned shareholders. Simultaneously, the high payout ratio is seen as an effort to send a positive signal to the market and improve its persistently low valuation.

Despite a surge of over 8% on April 24, BANK OF GANSU's Hong Kong stock price remained at just HK$0.37 per share, consistently trading as a penny stock. However, the bank continues to face significant operational pressures. In 2025, the bank's operating income was 5.421 billion yuan, a decrease of 9% year-on-year, marking the second consecutive year of decline. Its net profit attributable to parent company shareholders was 588 million yuan, showing a marginal increase of less than 1% compared to the previous year. Nevertheless, this figure is still approximately 8.75% lower than the 645 million yuan net profit recorded in 2023.

By the end of 2025, BANK OF GANSU's non-performing loan (NPL) ratio stood at 1.93%, unchanged from the end of the prior year. Notably, the NPL ratio for its retail loans increased from 4.01% at the end of the previous year to 4.16%.

The bank recently announced its 2025 profit distribution plan, proposing a dividend of 1.18 yuan per 10 shares, totaling 1.778 billion yuan. This proposal will be submitted for approval at the 2025 annual general meeting. Following the announcement, the plan quickly became a major topic of market discussion. This dividend distribution ends a six-year period without payouts for the bank. The total dividend amount represents 302% of its 2025 net profit, significantly higher than the industry norm. For comparison, the combined dividends of the six major state-owned banks for 2025 totaled 427.4 billion yuan, maintaining a payout ratio of around 30% of their net profits.

After its 2018 listing, BANK OF GANSU distributed a final dividend for 2018 in June 2019, paying 0.1022 yuan per share for a total of 1.029 billion yuan. It then suspended cash dividends for the subsequent six years. The bank had previously attributed the long hiatus in dividends to factors such as strengthening its development foundation, replenishing capital, and considering long-term future growth.

Retained earnings, accumulated from the bank's net profit after tax minus previous dividends and provisions for reserves, served as the primary source for this substantial dividend payout. At the end of 2025, BANK OF GANSU's retained earnings were 5.221 billion yuan, accounting for 15.3% of its total shareholders' equity. The planned dividend of 1.778 billion yuan constitutes 34.05% of these retained earnings. While this dividend fills the gap of six years without payouts, it will also deplete internally generated capital. By the end of 2025, the bank's core tier 1 capital adequacy ratio was 11.07%, down 0.09 percentage points from the end of 2024. Its tier 1 capital adequacy ratio and total capital adequacy ratio both improved to 12.07%, indicating a relatively sufficient capital buffer.

Industry analysis suggests the primary reasons for the large dividend are to address the expectations of state-owned shareholders and restore market confidence. As a regional city commercial bank, BANK OF GANSU has no controlling or actual controller, but Gansu state-owned entities hold significant influence. At the end of 2025, the bank's top four domestic shareholders were all state-owned, including Gansu Provincial Public Aviation Tourism Group, Gansu Provincial State-owned Assets Investment Group, Jiuquan Iron & Steel Group, and Jinchuan Group, holding direct stakes of 17.63%, 12.67%, 6.53%, and 6.53% respectively. Furthermore, against a backdrop of weak liquidity in the Hong Kong market and generally low valuations for regional city commercial banks, a high dividend payout ratio can signal operational stability and robust cash flow, aiming to boost investor confidence and address the issue of a depressed stock price.

Despite the generous dividend, BANK OF GANSU's operational performance is not as strong. Its 2025 annual report shows operating income of 5.421 billion yuan, down 9% year-on-year, and a net profit attributable to parent company shareholders of 588 million yuan, a slight increase of less than 1%. Compared to the 2023 net profit of 645 million yuan, this still represents a decline of about 8.75%. The bank attributed the decrease in revenue alongside a slight profit increase to its focus on serving the real economy, increasing credit asset allocation, proactively optimizing its asset-liability structure, reducing debt costs, implementing stringent cost control, and thereby reducing operating expenses.

Influenced by factors including lower market interest rates, the bank's net interest income in 2025 was 4.413 billion yuan, a decrease of 4.8% year-on-year, with the net interest margin narrowing again to 1.09%. In terms of non-interest income, net fee and commission income was 448 million yuan, an increase of 12% year-on-year, while net gains from investment securities and other financial assets were 190 million yuan. On the expenditure side, total operating expenses for 2025 were 2.356 billion yuan, down 0.9% year-on-year, and credit/asset impairment losses were 2.63 billion yuan, a reduction of 15.2% year-on-year.

Total assets reached 435.896 billion yuan by the end of 2025, an increase of 5.1% from the end of the previous year. Total customer loans and advances (including accrued interest) were 229.619 billion yuan, a slight decrease of 0.8% from the end of the prior year. Corporate loans amounted to 149.942 billion yuan, down 2.7%, which the bank stated was due to proactive adjustments to its asset structure. The retail loan portfolio saw a small increase, rising from 53.8 billion yuan at the end of the previous year to 54.066 billion yuan.

The bank's overall NPL ratio remained at 1.93% at the end of 2025. A detailed breakdown shows the retail loan NPL ratio increased from 4.01% to 4.16%. Specifically, the NPL ratio for personal business loans remained high, increasing further from 19.43% at the end of 2024 to 19.92%. The NPL ratio for personal consumption loans also rose, from 2.77% to 3.25%. It is also noteworthy that revenue from the retail banking business in 2025 was 1.797 billion yuan, a decrease of 9.3% year-on-year, with pre-tax profit falling 21.9% to 626 million yuan. In contrast, the corporate banking business generated revenue of 2.141 billion yuan, an increase of 10.7% year-on-year, but recorded a pre-tax loss of 766 million yuan, which was 70.9% larger than the previous year. The financial markets business reported revenue of 1.377 billion yuan, down 29.4% year-on-year, while pre-tax profit surged 180.6% to 570 million yuan.