China's rural bank struggles to attract deposits
BOC Fullerton cites lack of working-age people in county, but urbanisation may lift hopes
Edible oil producer Ye Jianjun is the kind of borrower BOC Fullerton Community Bank likes to boast about. Two years ago, a local operation of the rural bank extended 100,000 yuan (HK$126,000) to Ye in Qichun county, Hubei province. He received the loan in 10 days and bought rapeseed in time to earn a big fortune.
"No bank was able to lend so quickly," the 52-year-old Ye said. "The bank only required to check my business and production licences. No collateral or guarantee was required. The procedure was very simple."
The Qichun bank is the first rural lender set up by BOC Fullerton, a joint venture between Bank of China and Singapore sovereign wealth fund Temasek's unit Fullerton. Established in the poverty-stricken county in 2011, the lender was one of 1,000 rural bank outlets across the country set up since 2007 in response to Beijing's call to serve farmers and rural areas.
A lack of deposits is a problem shared by many rural banks. And the Qichun unit of BOC Fullerton is no exception, even persuading Ye to become a depositor.
There are always a couple of months in the beginning of every year that Ye has idle money. Procurement of rapeseed usually starts from May. Before that, tens of thousands of yuan collected from wholesalers at the end of the previous year was sleeping in bank accounts, said Ye.
Tao Xudong, president of the Qichun bank, tried to convince Ye to deposit the money in the bank.
"We have a service that transfers your money to time deposits regularly. Once you need to use the money, it could be transferred back to your account quickly," Tao said.
But Ye hesitated. He usually receives payments and pays for procurements through other banks. The large number of outlets owned by big banks make transactions more convenient and at lower costs.
"It's very hard to attract deposits," Tao said. "Initially, we relied on our staff to invite acquaintances to deposit. However, that cannot go for long. We have to reach out harder to residents."
BOC Fullerton has 53 outlets across the country. At the end of October, outstanding deposits totalled 280 million yuan in the Qichun bank, down from 288 million yuan a month ago. The daily average new deposits was 96 million yuan in the first three quarters of this year, compared with 147 million yuan for all of last year, said Tao.
Tao said the yearly figure was boosted by year-end effects. Despite the distortion, she conceded it was increasingly difficult to attract deposits.
Things were much easier for larger rivals in the region, said Zheng Rong, the bank's risk officer and a former employee of the local unit of a state-owned bank.
With a population of 1.03 million, about 80 per cent of the working-age population in Qichun leave their hometowns to work in Guangdong, Fujian and other provinces. They have a debit card to transfer wages back to family members at home who have an affiliated savings account book.
Things do not work like that for the rural bank. Its outlets are in counties and villages, instead of coastal cities with a large number of migrant workers. Also, it did not have savings books, said the bank executives.
However, the bank was undeterred by the struggle to compete with the larger lenders because there was potential to develop deposits, Zheng said.
In the 2,398 square kilometre county, bulldozers and cranes are a common sight building roads, parks and apartments in an investment rush to pursue urbanisation. The drive was expected to generate demand for banking services, bank executives said. A source of deposits is compensation money people receive for the demolition of their homes. Also, the bank provides mortgage loans to homebuyers who move from villages to downtown areas of Qichun.
"We are making great efforts to reach clients," Tao said. "We are advertising on local television stations and going to communities to promote our brand. Also, we plan to open more outlets."
Established in March 2011, the bank reported a 3.69 million yuan loss for that year, before achieving a 609,000 yuan net profit last year and 4.79 million yuan in net earnings for the first three quarters of this year. While outstanding loans stood at 252 million yuan at the end of October, the non-performing loan ratio was 0.08 per cent, the bank said. It has opened two branches in Qichun.