Smaller Chinese Banks Expected to Accelerate Initial Public Offerings Following Call for More Equity Financing from PBOC

146

Smaller lenders in China are expected to step up efforts to raise capital via initial public offerings (IPO), following signals of encouragements from the Chinese central bank.

On 26 May the People’s Bank of China (PBOC) issued the “Notice Concerning Driving the Establishment of Long-term Mechanisms for Finance to Service Micro-and-Small Enterprises, and Daring to Loan, Willingness to Loan and Ability to Loan” (关于推动建立金融服务小微企业敢贷愿贷能贷会贷长效机制的通知).

The Notice calls for “encouraging banks with comparatively strong qualifications to finance via equity markets, and expand the vigour of supplementation from externally sourced capital.”

Liao Zhiming (廖志明), chief banking sector analyst with China Merchant Securities, said that the central bank’s policy to encourage banks to seek financing via equity markets will increase the pace of IPO’s by small and medium-sized banks.

There are currently 10 small-scale Chinese banks awaiting the listing of A shares in China, including four municipal commercial banks and 6 rural commercial banks.

These banks include Bozhou Yaodu Rural Commercial Bank (亳州药都农商行), Jiangsu Hai’an Rural Commercial Bank (江苏海安农商行), Jiangsu Kunshan Rural Commercial Bank (江苏昆山农商行) and Bank of Huzhou (湖州银行), all of whom are seeking a listing on the main board of the Shanghai Stock Exchange; as well as Anhui Ma’an Shan Rural Commercial Bank (安徽马鞍山农商行), Bank of Dongguan (东莞银行), Guangdong Nanhai Rural Commercial Bank (广东南海农商行), Guangdong Shunde Rural Commercial Bank (广东顺德农商行), Bank of Guangzhou (广州银行) and Chongqing Sanxia Bank (重庆三峡银行), all of whom are seeking a listing in Shenzhen.

The Notice also said that PBOC would “continue to support small and medium-sized banks in the issuance of perpetual bonds and second-tier capital bonds, and cooperate with the relevant authorities in guiding local governments to make effective use of new issues of special bonds to rationally supplement the capital of small and medium-sized banks.”