Hong Kong’s first listed Chinese rural bank moves closer to a return to A-share market

A growing number of H-share Chinese banks have shown their intention for an A-share offering to strengthen capital as regulators tighten rules to contain financial risks

PUBLISHED : Friday, 05 January, 2018, 6:33pm
UPDATED : Sunday, 07 January, 2018, 2:30pm

Chongqing Rural Commercial Bank, one of China’s largest lenders to farmers and small businesses, said its A-share IPO application has been accepted by China Securities Regulatory Commission, marking a major step for the first Hong Kong-listed rural lender to return home.

It is among a growing number of H-share Chinese banks that have signalled or applied for an A-share offering, as they eye the domestic market with higher valuations amid regulators’ tightening rules on bank capital.

The CRCB said on Tuesday that the securities regulator had accepted its application for an A-share IPO and that the prospectus will be published on CSRC’s website in due course.

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The listing is subject to approval from the CSRC and other relevant regulatory authorities.

The bank, which debuted on the Hong Kong stock exchange in 2010, is facing increasing pressure to strengthen its capital, as China tightens bank capital rules to contain risks in the financial sector.

CRCB’s capital adequacy ratio fell two years in a row in 2014 and 2015, before slightly rebounding in the past two years. At the end of September, the capital adequacy ratio stood at 13.15 per cent, but still below than the 13.31 per cent at the end of 2013.

Last year, CRCB said it planned to list on the Shanghai Stock Exchange and issue around 1.35 billion shares, with the entire proceeds to be used to replenish its capital.

The new shares will account for 12.73 per cent of its share capital after the completion of the offering.

CRCB is not the first H-share lender to plan a secondary listing on the A-share market.

Postal Savings Bank of China announced in August that it planned to list in Shanghai and issue around 5.17 billion new shares to strengthen its capital ratio.

Chongqing Rural IPO aims to raise US$1.55b

Smaller regional lenders like Harbin Bank, Bank of Zhengzhou, Huishang Bank, Shengjing Bank, and Bank of Qingdao have also applied for a secondary listing on the A-share market. These lenders all posted a year on year drop in core tier 1 capital ratio at the end of June, while their bad loans rose at the same time.

However, Shengjing Bank withdrew its application in 2016 because of a change in its shareholding structure.

Currently, more than 20 Chinese banks are listed in Hong Kong.

Only the Big Five state banks – Bank of China, ICBC, China Construction Bank, Agricultural Bank of China and Bank of Communications, as well as China Merchants Bank, China Minsheng Banking Corp, Citic Bank, and Everbright Bank have dual listings. All of nine banks’ A shares traded at a premium ranging from 11 per cent to 53 per cent against the H shares at the close of trading on Friday.