What Can We Make Of China Zheshang Bank's (HKG:2016) CEO Compensation?

This article will reflect on the compensation paid to Renyan Xu who has served as CEO of China Zheshang Bank Co., Ltd (HKG:2016) since 2018. This analysis will also assess whether China Zheshang Bank pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

View our latest analysis for China Zheshang Bank

How Does Total Compensation For Renyan Xu Compare With Other Companies In The Industry?

At the time of writing, our data shows that China Zheshang Bank Co., Ltd has a market capitalization of HK$98b, and reported total annual CEO compensation of CN¥3.9m for the year to December 2019. That's a notable decrease of 30% on last year. In particular, the salary of CN¥2.34m, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar companies in the industry with market capitalizations above HK$62b, we found that the median total CEO compensation was CN¥2.2m. Accordingly, our analysis reveals that China Zheshang Bank Co., Ltd pays Renyan Xu north of the industry median. Moreover, Renyan Xu also holds HK$2.3m worth of China Zheshang Bank stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Talking in terms of the industry, salary represented approximately 60% of total compensation out of all the companies we analyzed, while other remuneration made up 40% of the pie. Although there is a difference in how total compensation is set, China Zheshang Bank more or less reflects the market in terms of setting the salary. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

China Zheshang Bank Co., Ltd's Growth

China Zheshang Bank Co., Ltd has reduced its earnings per share by 2.6% a year over the last three years. It saw its revenue drop 1.9% over the last year.

Its a bit disappointing to see that the company has failed to grow its EPS. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has China Zheshang Bank Co., Ltd Been A Good Investment?

China Zheshang Bank Co., Ltd has not done too badly by shareholders, with a total return of 1.7%, over three years. But they would probably prefer not to see CEO compensation far in excess of the median.

To Conclude...

As previously discussed, Renyan is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. Unfortunately, EPS has not grown in three years, failing to impress us. While shareholder returns are acceptable, they don't delight. So you may want to delve deeper, because we don't think the amount Renyan makes is justifiable.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for China Zheshang Bank that investors should think about before committing capital to this stock.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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