Beleaguered Bank of Gansu Unveils Share Issuance Plan for State-owned Investors

The latest regional bank in China to succumb to difficulties has just unveiled the details of a new share issuance plan.

Bank of Gansu (甘肃银行) plans to issue up to 3.75 billion shares to a slew of four state-owned enterprises in Gansu province.

These enterprises include:

• Gansu Sheng Guotou (Gansu Province State Investment) (甘肃省国投) – 41.33%,
• Gansu Sheng Gonghanglu (甘肃省公航旅) – 40%,
• Jiugang Group (酒钢集团) – 9.33%,
• Yinchuan Group (金川集团) – 9.33%.

Guotou and Gonghanglu were originally the two largest shareholders in Bank of Gansu.

As of 17 April Guotou holds 3.57% of equity in Bank of Gansu directly, and approximately 12.49% indirectly via Gansu Sheng Diantou (甘肃省电投) and Yinchuan Group.

Following the share increase Guotou’s direct stake will rise to 12.67%, while Gonghanglu’s holdings will rise from 12.49% to 18.30%.

The move comes after Caixin reported that Gansu province regulators were forced to intervene in a potential bank run in early April.

On 5 April Bank of Gansu’s Longnan branch in northwestern Gansu province received a rash of over-the-counter requests for cash withdrawals.

Concern over the potential for a bank run prompted local regulators to announce on 6 April that the bank had an adequate volume of assets and that operations were in sound condition.

2019 was an especially difficult year for China’s regional banks, with Beijing intervening to stem bank runs on multiple occasions.

In May 2019 the Chinese central government launched a takeover of beleaguered Inner Mongolian lender Baoshang Bank – the first time that Chi­nese reg­u­la­tors launched the of­fi­cial takeover of a com­mer­cial bank.

Do­mes­tic an­a­lysts say that the de­ci­sion helped to pre­vent a bank run in the re­gion of In­ner Mon­go­lia, while oth­ers re­ferred to the in­ci­dent as a “mini-Lehmann mo­ment” which would lead to the con­sol­i­da­tion of other small-scale Chi­nese lenders. 

Two re­gional banks in China also met with abortive bank runs within a two week pe­riod in November – Yingkou Bank in the north­east­ern province of Liaon­ing and Yichuan Rural Com­mer­cial Bank in Henan province. 

Related stories

Think Tank Frets over Im­pact of Coro­n­avirus on Chi­na’s Small Busi­nesses and Re­gional Banks

Baoshang Bank Takeover Helped Fore­stall Bank Run: Ren­min Uni­ver­si­ty’s Dong Ximiao