In June 2026, before the shareholders' meeting of Huishang Bank (03698.HK) even commenced, a 5,000-word interim proposal had already sparked significant attention.

The proposal came from the Zhongjing Group. This private capital group, helmed by Gao Yang, is the second-largest shareholder of Huishang Bank, holding a 10.59% stake. In their proposal, they directly criticized the dividend plan drafted by the board as "highly unreasonable," demanding an increase from 2.5 yuan per 10 shares to 3.41 yuan, raising the payout ratio from 22% to 30%.

The difference between the two plans amounts to 1.26 billion yuan, bringing the long-simmering tensions between Huishang Bank and the Zhongjing Group back into the spotlight.

This is not the first time the Zhongjing Group has opposed Huishang Bank. Since 2016, a tug-of-war over dividends between the two sides has persisted for nearly a decade. Proposals have been made year after year, only to be rejected each time.

On the surface, this appears to be a case of shareholders dissatisfied with the bank's dividend payouts. However, at a deeper level, it represents a typical dilemma currently facing the banking industry: banks wish to retain profits to bolster capital, stabilize operations, and manage risks, while shareholders desire clearer cash returns. Especially against the backdrop of persistently low valuations for bank stocks, dividends have become a crucial signal for investors to assess a bank's governance quality and investment value.

The dividend choices of two other banks previously analyzed—Gansu Bank and Zhengzhou Bank—also point to the same fundamental question: Should the money a bank earns be kept for itself first, or distributed to shareholders?

Huishang Bank's Solid Fundamentals

This is precisely why shareholders are pressing for higher dividends. A key reason the current dividend dispute is so sensitive is that Huishang Bank is not a bank facing obvious operational difficulties.

In terms of scale, Huishang Bank is already a leading city commercial bank. By the end of 2025, its total assets exceeded 2.4 trillion yuan, a year-on-year increase of 15.46%. In terms of profitability, the bank achieved operating revenue of 37.5 billion yuan and a net profit of 16.926 billion yuan in 2025, representing growth of 0.87% and 6.34% respectively.

Asset quality and capital metrics also provide room for shareholder questioning. By the end of 2025, Huishang Bank's non-performing loan ratio had dropped to 0.98%, with a provision coverage ratio reaching 278.79%. As of the end of the first quarter of 2026, its core tier-1 capital adequacy ratio, tier-1 capital adequacy ratio, and total capital adequacy ratio stood at 9.92%, 11.34%, and 13.69% respectively.

Based on these public indicators, Huishang Bank is not a bank with a weak capital safety net that necessitates extremely low dividend payouts.

This forms the foundational logic behind the Zhongjing Group's demand to raise the payout ratio to 30%: since the bank is still growing, asset quality is stable, and capital metrics meet regulatory requirements, shareholders deserve more substantial cash returns.

The Zhongjing Group cited data in its proposal: among 57 A-share and H-share listed banks, 23 have a lower core tier-1 capital adequacy ratio than Huishang Bank but offer a higher dividend payout ratio. Major city commercial banks like Bank of Beijing, Bank of Jiangsu, and Bank of Nanjing all maintain payout ratios around 30%, and they are also systemically important banks subject to an additional 0.25 percentage point capital buffer requirement. The subtext is clear: if others with tighter conditions can pay 30%, why should you, with more relaxed conditions, only offer 22%?

However, from another perspective, the conservatism of Huishang Bank's board is not entirely without reason. As the only city commercial bank in Anhui, it initiated an A-share listing plan in 2018, which has yet to succeed. Particularly in recent years, as net interest margins for banks have continued to narrow, expanding asset scale consumes more capital. At this juncture, retaining more profits means preserving more operational flexibility for the bank.

Zhongjing Group's Dividend Demand

Behind the demand for dividends, there are also pressures related to valuation and funding. The disagreement between the Zhongjing Group and Huishang Bank is not a new development.

Looking at the shareholding relationship, the Zhongjing Group has been involved with Huishang Bank for nearly two decades. As of the end of 2025, the group held a combined 10.59% stake in Huishang Bank through various entities, making it the de facto second-largest shareholder. It is unsurprising that a long-term shareholder with a significant stake would have stronger demands for dividends.

The entanglement between the two parties dates back to 2006 when the Zhongjing Group invested through the joint venture Zhongjing Sihai, subsequently increasing its holdings. In 2015, it surpassed Anhui Provincial Energy Group to become the largest shareholder.

The turning point came in 2016 when Huishang Bank planned to issue 6 billion yuan in preferred shares. The Zhongjing Group opposed this, advocating for maintaining a 30% dividend payout ratio—this marked their first direct confrontation, and the Zhongjing Group lost. In 2017, when the bank's board proposed a 10% payout ratio of net profit, the Zhongjing Group demanded a return to 30%, stating, "We cannot only consider our own interests while ignoring the interests of the vast number of investors." The proposal was defeated with 68% of votes against. Since then, the Zhongjing Group has proposed dividend-related motions at the annual shareholders' meeting every year, only to have them rejected.

The conflicts between the two sides extend beyond dividends. In 2019, Gao Yang attempted to sell his stake to C.S. Holding for 12.15 billion yuan, but the deal fell through due to disputes over share transfer and payment, leading to litigation. In March 2026, Gao Yang publicly admitted that the Zhongjing Group's total debt was approximately 8 billion yuan, with about 6 billion yuan overdue. Liquidating its stake in Huishang Bank has become the "ultimate solution" to resolve this debt.

Essentially, the Zhongjing Group's urgency for higher dividends is not solely about investment returns; it is also driven by its own operational cash flow and debt pressures. A major shareholder facing funding pressure and a bank wanting to retain more capital are almost destined for a conflict of interest.

The Banking Dividend Conundrum

How should a bank's funds be allocated between capital safety and shareholder returns? Huishang Bank is not an isolated case. In recent years, dividend choices among regional banks have increasingly diverged, as illustrated by two contrasting examples from previous analysis.

One is the more aggressive Gansu Bank. In 2025, Gansu Bank proposed a cash dividend of 1.18 yuan per 10 shares, totaling approximately 1.778 billion yuan, while its net profit for the same period was only 590 million yuan. The dividend amounted to over three times the annual profit. This plan was not simply "distributing what was earned"; it utilized retained earnings accumulated over many past years.

Gansu Bank had not paid final dividends for many years, retaining profits to bolster capital and stabilize operations. Once risk indicators stabilized and capital metrics remained manageable, it used part of its historical accumulation to reward shareholders. This approach sent a clear signal: the bank is once again prioritizing shareholder returns. However, the obvious problem is that such an ultra-high payout ratio is difficult to sustain long-term, ultimately depending on whether future profitability can keep pace.

The other example is the more conservative Zhengzhou Bank. In 2025, Zhengzhou Bank remained profitable, achieving a net profit attributable to shareholders of 1.895 billion yuan, but it chose not to pay a cash dividend. The reason is understandable: its capital pressure was more evident. By the end of 2025, Zhengzhou Bank's core tier-1 capital adequacy ratio was 8.45%, continuing to decline from the previous year-end, while its asset scale was still expanding. Scale growth consumes capital, and profit growth is not fast enough, making retaining profits to replenish capital the more practical choice.

Huishang Bank sits precisely between these two examples. It is not like Gansu Bank, needing to send a signal through a dividend significantly higher than current profits; nor is it like Zhengzhou Bank, where capital pressure is so tight that replenishment must be prioritized. Huishang Bank's fundamentals are more stable, and its capital metrics still have a buffer, which is why the Zhongjing Group questions: Since it is not a case of "cannot pay," why not pay more?

When capital is tight, lower payouts are understandable; when capital is robust, a moderate increase in dividends should also become an expectation. What shareholders fear most is not the bank retaining money, but not knowing why it is being retained or what changes it will bring.

In Conclusion

Bank dividends are never a simple matter of "generosity" or "stinginess"; they are the result of the interplay between the operational stage, capital condition, shareholder structure, and external constraints.

The nearly decade-long dispute between the Zhongjing Group and Huishang Bank, while superficially about the dividend payout ratio, is fundamentally a contest over one thing: rules.

The Zhongjing Group wants a stable, predictable dividend commitment. Huishang Bank wants flexibility to retain capital for uncertainties. Neither demand is wrong, but when they remain at odds for a long time, trust erodes.

Ultimately, dividends are not charity; they are a form of contract. The most responsible attitude a listed bank can have towards its shareholders is not sudden generosity in one year, nor perpetual stinginess, but establishing a stable, transparent mechanism that the market can understand. If money is retained, its intended use must be clearly explained; if money is distributed to shareholders, it must be backed by sustainable operational strength.

A bank's money must be both reserved for the future and distributed to those who have supported it long-term. The difficulty lies not in choosing one over the other, but in finding a balance between the two that the market is willing to believe in.