Citic Securities chairman Wang Dongming fined for ICBC remarks

Wang Dongming, the chairman of Citic Securities, the mainland's largest brokerage firm by market value, has been fined two months' salary after publicly reprimanding state-owned Industrial and Commercial Bank of China for racking up huge profits.

The 62-year-old's remark, reported by mainland media at the weekend, was a rare incident on the mainland, where all senior executives of state-owned enterprises are appointed by the government.

The Beijing-headquartered brokerage, which is listed in Hong Kong and Shanghai, acknowledged the mistake in an internal statement yesterday, saying the firm had decided to fine Wang to raise his awareness of the need to exercise caution when speaking publicly.

"The misinterpreted speech by Wang has quickly spread out on the internet, which may have adversely affected the lender's reputation and influenced the long-term relationship between the two parties," Citic Securities said.

Wang, who joined the firm in 1995, made 5.83 million yuan (HK$7.25 million) last year, which means the fine could cost him close to 1 million yuan.

The media cited the Citic chairman as telling then ICBC president Yang Kaisheng that ICBC's extraordinary post-tax profit of hundreds of billions of yuan could result in public condemnation of its monopolistic status. ICBC is the mainland's largest lender by assets.

Two people familiar with the firm confirmed the statement, adding that ICBC was an important and valued client of Citic Securities and the conversation between the two senior executives had been quoted out of context. They said the incident happened a long time ago, with Yang retiring as ICBC president last year.

ICBC's first-quarter net profit rose 6.75 per cent year on year to 73.46 billion yuan, while Citic Securities' net profit rose 34 per cent to 1.3 billion yuan - just 1.8 per cent of ICBC's.

ICBC's return on equity, a measure of profitability, declined to 22.27 per cent at the end of March from 23.71 at the same time last year, while Citic Securities' rose slightly to 1.48 per cent, well below average returns in the banking industry.

Analysts at Bank of America Merrill Lynch said Citic Securities was being challenged by rivals such as Huatai Securities that offered low commission rates, and competition for clients could lead to a decline in market share.

ICBC shares have dropped 10.5 per cent in Hong Kong this year, while Citic Securities shares have plunged more than 23 per cent. The Hang Seng Index has declined about 4 per cent.