China’s rural banks have applied en masse for new share issues as they struggle with a sharp increase in dud or overdue loans.
Filings with the China Securities Regulatory Commission (CSRC) indicate that 29 of China’s rural banks have applied to raise capital via the sale of new shares in 2019.
10 of these 29 banks have posted non-performing loan (NPL) ratios in excess of 5%, ahead of the warning threshold mandated by the China Banking and Insurance Regulatory Commission (CBIRC), while 15 of them saw a rise in their NPL ratios during the period from 2007 and 2018.
Hebei Luanping Rural Commercial Bank saw its NPL ratio rise from 4.85% in 2017 to 7.96% in 2018, impacted by an ailing minerals market, while Jiangxi Yushan Rural Commercial Bank saw its NPL ratio surge to 22.98% in the first half of 2019, as compared to 4.71% at the end of 2017.
Pengze Rural Commercial Bank’s NPL ratio rose to 8.84% in the first half of 2019, as compared to 4.83% for 2017 .
The “2019 China Financial Stability Report” (中国金融稳定报告（2019）) recently issued by the Chinese central bank found that 586 out of 4,379 domestic lenders were in the “high risk” category, including over a third of all rural lenders.
2019 has been a tumultuous year for smaller regional lenders in China, with a string of bank runs and upsets which in some cases necessitated intervention from the central government.
Two regional banks in China met with abortive bank runs within a two week period in early November – Yingkou Bank in the northeastern province of Liaoning and Yichuan Rural Commercial Bank in Henan province.
Earlier in the year the Chinese government took over Inner Mongolia’s beleaguered Baoshang Bank in May, for the first such forcible acquisition in more than two decades.
A trio of leading state-owned financial institutions subsequently took over the north-eastern Bank of Jinzhou in July, while state-owned Central Huijing Investment subsequently intervened in the fortunes of Shangdong province’s Hengfeng Bank.