Plan to raise listing threshold on banks

PUBLISHED : Wednesday, 16 March, 2011, 12:00am
UPDATED : Wednesday, 16 March, 2011, 12:00am


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Beijing plans to raise the listing threshold for the mainland's 143 city commercial banks, a move to bar most of them from floating initial public offering shares.

But this will not affect Bank of Shanghai which is set to list on the Shanghai Stock Exchange this year, eyeing a net 20 billion yuan (HK$23.7 billion) to replenish capital.

City commercial lenders whose total assets were less than 80 billion yuan would not be given approval to launch offerings, said New Century Weekly, a magazine run by former Caijing editor Hu Shuli.

Neither the securities regulator nor the banking watchdog would comment on the issue yesterday.

The magazine also said the city banks must report net interest income of more than two billion yuan a year before applying for a flotation.

At present, there are no requirements on banks' assets when they file applications to list.

The asset requirement would keep at least 120 city commercial lenders out of stock market.

Bank of Shanghai, which has filed listing applications to the China Securities Regulatory Commission, had total assets of more than 460 billion yuan at the end of 2009.

The lender is tipped to become the mainland's fourth city commercial bank to issue an A-share float.

Bank of Shanghai would sell 1.2 billion shares, expecting to raise 20 billion yuan. The lender badly needs fresh funds to boost capital levels following a two-year lending spree.

A division manager with the Shanghai bank said it secured verbal approval from top regulators for the offering.

The stricter asset requirements come amid regulators' concerns about reckless expansion by mid and small-sized city banks, the magazine said.

'Fund-raising by mainland banks won't be active this year,' Zhong De Securities analyst She Minhua said. 'But Bank of Shanghai's IPO has definitely been put on the agenda.'

The bank planned an offering on the Shanghai exchange in 2007, but was forced to change its shareholding structure because the stake held by individual investors before the listing exceeded the regulator's limit.

China's mid-sized banks are likely to raise more than 100 billion yuan of funds from the stock markets this year, only 25 per cent of the amount raised last year. On the mainland, local governments created city commercial banks, which deal with banking business in their own cities.

Through fund-raising deals on stock markets, these banks can acquire fresh capital to pay for their expansion nationwide.

Mainland banks extended 9.6 trillion yuan of loans in 2009, followed by nearly eight trillion yuan of credit last year. The lending binge spooked regulators amid rising risks of bad loans.

Last week, mainland banks had an outstanding 1.77 trillion yuan of doubtful loans extended to the financing vehicles of local governments - state-owned firms responsible for fund-raising and investing in infrastructure projects set up by the government.

Raising the stakes

City banks whose total assets were less than this much, in yuan, will not get approval to launch IPOs: 80b yuan