State owned enterprises’ participation in the banking industry is a hot spot in 2021!
As of January 13, 2022, 33 of 41 A-share listed banks have broken the net. While the share price of bank shares has been undervalued for a long time, small and medium-sized banks have been frequently invested by state-owned assets. Among them, the banks “favored” by state-owned enterprises are Bank of Hubei, Bank of Sichuan, Guangdong Nanyue bank, Guangzhou rural commercial bank, etc.
Specifically, Guangzhou rural commercial bank obtained an additional 1.338 billion shares held by four state-owned enterprises, Bank of Hubei obtained an additional 110 million shares held by state-owned enterprises, Bank of Sichuan 99.97 million shares, and Guangdong Nanyue bank welcomed a state-owned enterprise to become the controlling shareholder of the bank.
Many people in the industry believe that the equity participation of state-owned enterprises is conducive to banks to supplement capital and improve their anti risk ability. The reporter of business school sent letters to Bank of Hubei, Bank of Sichuan, Guangdong Nanyue bank and Guangzhou rural commercial bank on the impact of state-owned enterprise shares on banks, as well as capital adequacy ratio, future “blood replenishment” plan and recent operation. As of press time, no reply has been received
many banks have been “overweight” by state-owned assets
On December 21, 2021, Guangzhou rural commercial bank issued 1.338 billion domestic shares to four state-owned enterprises: Guangzhou Metro Group Co., Ltd. (hereinafter referred to as “Guangzhou Metro”), Guangzhou urban renewal Group Co., Ltd., Guangzhou Industrial Investment Holding Group Co., Ltd. and Guangzhou Commercial Investment Holding Group Co., Ltd. After the issuance, the shareholder structure of Guangzhou rural commercial bank will also change greatly. Guangzhou Metro will replace Guangzhou financial holding as the largest shareholder of the bank with a shareholding ratio of 6.31%.
On December 16, 2021, according to Alibaba judicial auction network, Anneng Thermoelectric Group Co., Ltd. (hereinafter referred to as “Anneng thermoelectric”) held 110 million shares in Bank of Hubei, which was successfully auctioned by Jingmen Urban Construction Investment Holding Group Co., Ltd. (hereinafter referred to as “Jingmen urban investment company”) at the starting price of 361 million yuan, and Bank of Hubei welcomed a state-owned enterprise shareholder.
Guangdong Nanyue bank has also been supported by state-owned enterprises for many times. On October 26, 2021, Guangdong Nanyue bank and Guangdong Yuehai holding group (hereinafter referred to as “Yuehai holding”) held a signing ceremony of comprehensive strategic cooperation agreement. According to the spirit of the agreement, Bank of south Guangdong will provide a large amount of comprehensive credit for Yuehai group, and Yuehai holding will also carry out further cooperation with Bank of south Guangdong in credit financing, direct financing, corporate finance, capital settlement, etc. On November 24, 2021, the official microblog of Guangdong Nanyue bank said that the shareholder qualification of Guangdong Yuecai Investment Holding Co., Ltd. (hereinafter referred to as “Yuecai holding”) has been reviewed and approved by Guangdong banking and Insurance Regulatory Bureau, the share capital has been fully in place, and the change of registered capital has also been approved by Guangdong banking and Insurance Regulatory Bureau, officially becoming the controlling shareholder of the bank. It is understood that both Yuecai holdings and Yuehai holdings are controlled by the Guangdong provincial government, and the Guangdong Provincial Department of finance is the second largest shareholder.
On May 7, 2021, Alibaba auction website showed that the 99.97 million shares of Bank of Sichuan held by Sichuan Haoji Food Group Co., Ltd. had been successfully auctioned by Guang\’an Jincai investment and financing (Group) Co., Ltd. (hereinafter referred to as “Guang\’an Jincai group”), which is a state-owned holding enterprise directly under Guang\’an municipal government.
Bank of Sichuan is the first provincial legal person city commercial bank in Sichuan Province, based on the former Panzhihua City Commercial Bank and the former Liangshan Prefecture commercial bank, introduced 28 investors and adopted the new merger method. It was officially opened on November 7, 2020. The shareholders of Bank of Sichuan are mainly state-owned assets, of which the first largest shareholder Sichuan Financial Holding Group Co., Ltd. holds 20%, the second largest shareholder Liangshan development (holding) Group Co., Ltd. holds 15%, and the third largest shareholder Chengdu Tianfu Capital Investment Co., Ltd. holds 10%.
For the reasons why bank equity is “favored” by state-owned enterprises, Wang Pengbo, senior analyst of Broadcom analysis, said: “First of all, as the core industry of the national economy, under the background of sustained macroeconomic development, equity continues to increase in value; second, as the blood vessel and lifeblood of the economy, banks play a great role in economic operation and are irreplaceable; third, banks are relatively stable and belong to the scope of equity investment that can be held continuously.”
Du Meng, an independent economist and chairman of the China enterprise capital alliance, said: “in the uncertain market situation, uncertainty factors increase, but the blue chips represented by banks have always been regarded as the safe choice with the highest safety factor. The price of bank shares has been underestimated for a long time, and the dividend rate is relatively high, which is the direct driving force for the national team to buy.”
Du Meng also added: “the national team’s increased holdings of bank shares also reflects the overall uncertainty of the market from another aspect. The national team’s heavy position purchase of small and medium-sized market value banks, in addition to the hedging demand of stable investment, pays more attention to its comprehensive ability and sustainable growth.”
Which banks are easier to get support from state-owned enterprises? Wang Pengbo believes that: “Banks with relatively centralized and uncomplicated ownership structure, certain local influence, direct business relationship and relatively stable will be more likely to get the support of state-owned enterprises. He also said that most of the dividends paid by state-owned enterprises are good. Banks not only have stable lending channels, but also can get more transformation opportunities with one more scene today when the scene is king and banks are undergoing digital transformation. ”
state owned enterprise equity injection
Taking over shares of state-owned assets is an important way for small and medium-sized banks to supplement capital. The central bank and the cbcirc have repeatedly stressed the promotion of small and medium-sized banks to supplement capital. On April 3, 2020, on how to enhance the capital strength of small and medium-sized banks, Zhou Liang, vice chairman of the cbcirc, made it clear that he supported local governments to inject funds and realizable assets into some high-risk small and medium-sized banks, or supplement the capital of small and medium-sized banks through capital injection by state-owned capital operation companies.
According to the 2021 semi annual report data of Guangzhou rural commercial bank, by the end of June 2021, the bank’s core tier 1 capital adequacy ratio was 8.87%, tier 1 capital adequacy ratio was 10.34% and capital adequacy ratio was 11.98%, down 0.33%, 0.40% and 0.58% respectively compared with the beginning of the year.
In addition, in 2020, the capital adequacy ratio of Guangzhou rural commercial bank showed a downward trend. The bank’s core Tier-1 capital adequacy ratio, Tier-1 capital adequacy ratio and capital adequacy ratio decreased by 0.76%, 0.91% and 1.67% respectively. According to the rating report of China integrity international on the bank, in 2020, due to the obvious decline of profitability, the endogenous capital capacity was weakened. At the same time, the weakening of asset quality led to the rapid decline of excess loan loss reserves and the decline of capital adequacy ratio at the end of the year.
Guangzhou rural commercial bank announced that since the end of 2018, regulatory indicators such as capital adequacy ratio have a downward trend. The net amount of domestic shares issued this time after deducting relevant issuance expenses is about RMB 7.877 billion, and all the net proceeds will be used to supplement the bank’s core tier 1 capital. This will help to increase the capital base and further improve the capital adequacy index, so as to ensure continuous compliance with regulatory regulations, and improve operational stability and risk management ability.
By the end of September 2021, the capital adequacy ratio of Bank of Hubei was 14.25%, the Tier-1 capital adequacy ratio was 11.29% and the core Tier-1 capital adequacy ratio was 10.89%, an increase of 1.14%, 0.28% and – 0.12% respectively over the end of 2020.
The core tier 1 capital adequacy ratio of Bank of Hubei decreased by 0.12 percentage points compared with the beginning of the year. By the end of 2020, the bank’s capital adequacy ratio had shown a downward trend. By the end of 2020, the bank’s capital adequacy ratio, tier 1 capital adequacy ratio and core tier 1 capital adequacy ratio had decreased by 0.9 percentage points, 0.79 percentage points and 0.79 percentage points respectively year-on-year.
The latest rating report of Bank of Hubei by zhongchengxin international credit rating Co., Ltd. points out that the endogenous capacity of bank capital is weakened, and the rapid credit growth has a certain consumption of capital. Under the background of meeting the needs of supervision and their own business development, the pressure of bank capital supplement continues, especially the financial institutions of unlisted small and medium-sized banks.
In 2021, Bank of Hubei has completed a round of capital and share increase and issued 762 million additional shares to Hubei Provincial Department of finance. The bank said in the draft declaration of fixed increase that according to prudent calculation, it is expected that in the next 2-3 years, it will be difficult to meet the capital needs generated by business development only through profit retention, and it needs to supplement capital through exogenous channels as soon as possible, especially core Tier-1 capital.
By the end of June 2021, the core tier 1 capital adequacy ratio of Guangdong Nanyue bank was 10.87%, the tier 1 capital adequacy ratio was 10.87%, and the capital adequacy ratio was 12.33%, which decreased by 0.15%, 0.16% and 0.56% respectively compared with the beginning of the year.
According to the latest rating report of Guangdong Nanyue bank, the capital increase and share expansion will enhance the capital strength of Guangdong Nanyue bank. The retention of profits has played a better role in supplementing the bank’s capital, and the promotion of a new round of capital and share increase will help to further enhance its capital strength. However, the bank’s capital adequacy ratio is facing a downward trend in the first half of 2021.
Guangdong Nanyue bank said on the official wechat: “This time, we introduced Yuecai holding as a strategic investor. While replenishing capital and injecting customer resources, we will also play the role of the major shareholder of Yuecai holding’s state-owned enterprises, give full play to its strong capital strength, rich financial management experience, sufficient financial talent reserve, its financial sector can develop in concert with commercial banking business, gather customer resources, connect state-owned enterprise resources and undertake national financial investment Integrate the advantages of peer resources, further improve corporate governance, improve anti risk ability and strengthen market competitive advantage. “
obtain endorsement from state-owned enterprises to reduce credit risk
On November 23, 2021, the official website of Guangdong Yuecai Investment Holding Co., Ltd. announced that Yuecai holding, as a strategic investor, took shares in Guangdong Nanyue bank and will become the main shareholder of the bank. Yuecai holdings also said that the strategic investment in Guangdong Nanyue bank will not only supplement capital and inject customer resources into the bank, but also further give play to the role of major shareholders of state-owned enterprises and take advantage of the strong financial strength of Yuecai holdings to further improve the bank’s corporate governance and enhance its ability to resist risks.
Before the merger of Bank of Sichuan, Panzhihua bank and Liangshan Prefecture bank had prominent risks and were identified as high-risk institutions by the regulatory authorities, with a total peak of non-performing assets of 30 billion yuan. Therefore, the general idea of Sichuan bank’s preparation is to “resolve risks through reform and reorganization”.
Sichuan bank has adopted the methods of bad assets collection, packaging and stripping, write off of old shareholders’ rights and interests, digestion of new shareholders’ premium and undertaking at the place of registration to clean up bad assets. According to the bank’s 2020 annual report, by the end of 2020, the non-performing loan ratio of Bank of Sichuan was 2.14%, the non-performing loan balance was about RMB 1.351 billion, and the provision coverage was 335.16%. Although a large number of non-performing loans have been disposed, the non-performing loan ratio is still 0.3 percentage points higher than the average level of the same industry (1.84%).
By the end of September 2021, the balance of non-performing loans of Bank of Hubei was RMB 3.371 billion, a decrease of RMB 371 million over the beginning of the year; The non-performing rate was 1.98%, down 0.51 percentage points from the beginning of the year. However, previously, the balance of non-performing loans of the bank was RMB 3.688 billion in 2020, a year-on-year increase of 44.05%. The bank alleviated the pressure on the capital turnover of loan customers and the growth of its own non-performing loan indicators through the policy of deferred repayment of principal and interest, and increased the disposal of non-performing loans by means of collection, write off and other means, so that the asset quality improved.
By the end of 2020, the Bank of Hubei had a total loan of 147.979 billion yuan, a personal housing loan of 17.524 billion yuan and a real estate loan of 16.089 billion yuan. The bank’s real estate industry loans accounted for 22.71% of the total loans, exceeding the upper limit of real estate loans by 0.21 percentage points. China integrity International said that Hubei bank has a large exposure to real estate related industries and a high proportion of deferred principal and interest repayment loans. In the future, the bank’s asset quality will still face certain downward pressure.
In November 2021, Guangzhou rural commercial bank initiated two lawsuits against Jilin Zixin Pharmaceutical Industrial Co.Ltd(002118) due to disputes over financial loan contracts, involving two principal amounts of 200 million yuan and 87.2 million yuan respectively. The cause of the case was the overdue of inter provincial housing loans through trust channels. Previously, Guangzhou rural commercial bank had fallen into a storm of trust default of 2.5 billion yuan, which was also caused by trust lending. The bank has frequent loan events and problems in internal management. This state-owned equity investment will promote the more standardized operation of Guangzhou rural commercial bank and jointly promote the local economic development.
In the context of the current economic downturn, many banks are more or less facing the pressure of asset quality. With the participation of local state-owned assets, it can promote the standardized operation of banks, improve the anti risk ability, and then improve the asset quality.
