(Yicai) June 5 -- Listed banks in China are facing growing pushback from minority investors at annual shareholder meetings, especially over dividend policy and executive pay, as slowing profit growth makes minority investors more sensitive to capital returns and governance.

Banks’ annual dividend plans have become a lightning rod for minority shareholders. Suzhou Rural Commercial Bank’s proposed dividend for last year, for example, was opposed by more than 10 percent of voting shareholders, with the rate among those holding less than 5 percent of the lender’s stock reaching as high as 15 percent.

Although the Suzhou-based bank had raised the payout ratio to almost 21 percent in 2025 from 17 percent in 2024, it was lower than the roughly 30 percent at most other listed lenders, making it a key source of dissatisfaction among its minority investors.

Bank of Xi'an's annual profit distribution plan received 804.8 million abstentions, exactly matching the number of shares held by its largest shareholder Scotiabank. Because the bank’s board had recommended a payout ratio of just 17 percent, the director appointed by the Canadian lender had already abstained when the proposal was reviewed by the board in April.

Factors such as narrowing net interest margins and increasing pressure to replenish capital have made banking executives more inclined to reduce dividends to strengthen their capital base, Fu Yifu, special researcher at Jiangsu Su Merchants Bank, told Yicai. In the context of declining risk-free interest rates, minority shareholders place greater value on cash returns, and their tolerance for banks maintaining low dividend ratios over the long term has clearly weakened, Fu said

“Because bank stocks have long traded at low valuations, high dividend yields have become a core attraction for investors,” said a banking analyst from a brokerage in East China, adding that this has widened the divide between executives and minority investors over profit distribution.

Executive compensation has also sparked dispute. At Bank of Hangzhou's annual general meeting, the two proposals that attracted the most opposition were both to do with executive pay, with more than 9.5 percent of those holding less than 5 percent voting against.

The pre-tax remuneration for Bank of Hangzhou's executives was CNY21.7 million (USD3.2 million) last year, the second highest among city commercial banks in China, just behind Bank of Ningbo, according to the lender's financial report. The combined pay for the top three executives exceeded CNY7.4 million (USD1.1 million), among the highest for listed city commercial banks.

Although these compensation levels were significantly lower than in 2024, they still drew criticism from some shareholders amid the banking industry’s broader push to cut costs and improve efficiency.

“Investors are not simply opposed to high executive pay,” a researcher who has been closely tracking bank governance told Yicai. “They’re more concerned about whether executive compensation is aligned with company performance.”

Against a backdrop of narrowing net interest margins and slowing revenue growth in the sector, if management pay grows much faster than a bank’s earnings, it can easily spark debate among shareholders about whether the incentive mechanism is reasonable, the person noted.

The change being observed at listed banks’ shareholder meetings -- not too long ago regarded as mere procedural formalities -- reflect the gradual maturing of China’s capital market, a long-time banking industry researcher said to Yicai.

With institutional investors accounting for a larger ownership share and minority shareholders becoming more aware of their rights, bank executives are expected to face heightened scrutiny and greater constraints from the capital markets, the person added.

Editors: Tang Shihua, Martin Kadiev