Opinion | Huishang wins key backing with a clean banking image
Anhui-based bank, unlike some of its mainland peers, has not drawn attention over loan book
There has been lots of talk over the past few years and much concern expressed about the health of the mainland's banking system, with the main investor fears being the appetite shown by lenders for risky loans, and their opaque window-dressing of balance sheets.
IPO hopeful Huishang Bank seems to have avoided accusations levelled against other city commercial banks about questionable off-balance sheet lending, as well as dubious relationships with local government financing vehicles.
The Anhui-based city commercial lender has secured at least six cornerstone investors, including mainland property developer China Vanke, for a combined US$639 million, or almost half of its US$1.3 billion share sale.
A close look into Huishang's listing document shows that it has addressed concerns over its exposure to local government financing vehicles and off-balance sheet activities. It stated that "it had not extended any loans to local governments; nor had we provided any guarantees to, or entered any other off-balance sheet arrangements with local government or their financing vehicles".
Huishang's low exposure to off-balance sheet items is also a source of confidence to investors. Its off-balance financing rose moderately to 59.3 billion yuan (HK$75.02 billion) in June from 53 billion yuan in December last year, representing an 11 per cent increase for the six-month period, while keeping the overall non-performing loan ratio at 0.58 per cent in June.
The mainland's central bank has sent a clear message to small lenders that they should expedite the development of new financing channels through innovations, and boost their ability to compete with the Big Four state-owned banks by offering more attractive rates.