Chinese bankers swoop in on own shares on the cheap as Evergrande’s debt crisis rattles market, drives valuations lower

Half a dozen Chinese banks said they would buy back their shares this month, as markets were roiled by concerns of exposure to China Evergrande Group

Ping An Bank, Bank of Shanghai and China Zheshang Bank are the latest to announce their buy-backs

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A signboard of China Zheshang Bank in Beijing on March 14, 2016. Photo: Reuters.

Published: 4:00pm, 28 Sep 2021Updated: 7:32pm, 4 Oct 2021

Major shareholders and senior executives of several Chinese banks have been on a buying spree, picking up the shares of their own organisations on the cheap, after China Evergrande Group’s debt crisis rattled capital markets and drove down valuations.

At least six listed commercial lenders, including Ping An Bank and Bank of Shanghai have announced plans to buy back their own stocks this month, when financial markets were roiled by concerns of exposure to Evergrande.

China Zheshang Bank, a nationwide lender based in the Zhejiang provincial capital of Hangzhou, was the latest to join the fray, with a statement on Monday announcing that its vice-president Liu Long had spent 1 million yuan (US$154,952) to buy back 283,300 of the bank’s shares from the Shanghai Stock Exchange. Jiangsu Expressway Company, the seventh-largest shareholder of Shanghai-listed Bank of Jiangsu, will raise its stake by 48 million shares, according to a September 24 statement by the lender.

The wave of buy-backs may instil some confidence in China’s beleaguered banking stocks as they size up their exposure to Evergrande’s US$300 billion liabilities. Chinese bank stocks trade at an average discount of 44 per cent to their book value, cheaper than any other industrial sector in the equity markets, according to data provided by Shanghai DZH.

A map showing China Evergrande Group’s development projects in China on a wall in Beijing on September 21, 2021. Photo: AP.

Their asset quality and bad loans remain a perennial concern among investors amid the relentless government campaign to cool the property market. Evergrande’s debt woes have exacerbated the angst, causing a gauge of 43 banks on the Shanghai and Shenzhen exchanges to fall by almost 5 per cent from a high this month.

Chinese banks are overly worried about any potential contagion risk from Evergrande, according to China Merchants Securities and China Everbright Securities.