IPO On The Eve Of The Two Shareholders Change To "Zhejiang'S Most Small City Business" Huzhou Bank Break Through A Shares

Another city commercial bank opened A shares IPO sprint - the Huzhou bank Limited by Share Ltd (Limited by Share Ltd) recently disclosed the prospectus, which is expected to issue no more than 338 million shares on the Shanghai Stock Exchange's main board (accounting for 25% of the total share capital issued). After deducting the issuance cost, the raised funds will be used to supplement the core tier one capital and raise the capital adequacy level.

As the smallest city in Zhejiang, the Bank of Huzhou has distinct local characteristics both in terms of its shareholders and its business.

It is worth mentioning that, on the eve of pre disclosure, Mei Jin energy clearing company, originally listed on the second largest shareholder of Huzhou bank, transferred its 12.5% stake in Huzhou bank, which was held in 2019. Since then, the company has invested 378 million yuan in assets and 3.73 yuan / share capital in the stock market. It ranks 10% among the second largest shareholders of Huzhou bank.

Two change of shareholders

In February 7th, after three rounds of counselling, the Bank of Huzhou disclosed the prospectus on the official website of the securities and Futures Commission.

The prospectus shows that as at the end of 9 2019, the total assets of the Bank of Huzhou amounted to 64 billion 561 million yuan, the loans were 32 billion 508 million yuan, and the deposits were 51 billion 373 million yuan; the operating income and net profit of the former September were 1 billion 316 million yuan and 624 million yuan respectively.

From the perspective of asset quality, the bad rate of banks in Huzhou has been decreasing in recent years. The end of 2016, the end of 2017, the end of 2018 and the end of 9 in 2019 are 1.72%, 1.06%, 0.66% and 0.58% respectively.

Huzhou bank revenues are highly dependent on net interest income. It achieved operating income of 1 billion 316 million yuan in the first three quarters of 2019 and a net profit of 624 million yuan. Among them, the net interest income is 1 billion 303 million yuan, accounting for 99.05% of the total revenue, accounting for 2017 and 103.66% respectively in 2018 and 103.67%. While the net income of interest is at a high level, its fees and commission net income are continuously losing. In 2017, 2018 and 2019, the losses in the first three quarters of the year were 71 million 442 thousand yuan, 99 million 980 thousand yuan and 98 million 296 thousand yuan respectively.

At present, the profit mode of commercial banks in China is highly dependent on the net interest margin. Therefore, the operating income is highly dependent on interest net income. In the past few years, the rapid growth of commercial bank's operating income mainly depends on maintaining a certain net interest rate level to realize the rapid expansion of asset scale, that is, the expansion of assets. Therefore, not only is the small and medium banks operating income highly dependent on interest net income, but the net income of the five major state-owned banks in China accounted for more than 70% of the operating income ratio, and the proportion of small and medium-sized banks is even higher. Zheng Jiawei, chief analyst of the new era securities banking industry, told reporters on twenty-first Century 10 February.

"This is related to the slow pace of the marketization of interest rate in China, and the traditional business model of commercial banks." He suggested that the first one is to push the interest rate marketization reform with LPR as the core, break the profit model of commercial banks' excessive reliance on interest net income, and force commercial banks to transform; two, encourage commercial banks to exert their efforts in financial subsidiaries; and the three is to encourage commercial banks to develop non interest income.

Compared with large state-owned banks and national shareholding banks, city commercial banks are concentrated in specific urban areas, often with strong regional advantages and prominent regional advantages, which are inseparable from local economy.

The ten largest shareholders of Huzhou bank are mainly local state assets and private enterprises. Under the background of such a shareholding structure, the loan business of Huzhou bank also shows obvious regional characteristics. The top ten customers are mainly loans from Huzhou and lower area and county government financing platform.

In terms of deposit and loan, according to geographical area, during the reporting period, banks in Huzhou absorbed deposits, and loans and advances were mainly concentrated in Huzhou, partly in Jiaxing. At the end of 9 2019, the proportion of deposits in the two places was 89.80% and 10.20% respectively, and loans and advances accounted for 82.57% and 14.73% respectively.

It is worth mentioning that, on the eve of the pre disclosure of the prospectus, the second major shareholders of Huzhou bank have changed.

In 2019, 600175.SH, the second largest shareholder of Huzhou bank, lost its position at a loss, transferring all 114 million shares of its Huzhou bank to five companies with a price of 3.5 yuan / share, with a profit or loss of about -2850 million.

Mei Du energy explained in the announcement that it is to further optimize the company's industrial structure, enhance capital operation efficiency, focus on superior resources to develop main business and enhance company liquidity. The financial situation of Mei Du energy was not optimistic at that time. In 2018, the Bank of Huzhou performance report showed that the United States energy had mortgaged all the shares of Huzhou bank. Mei Du energy lost 1 billion 96 million yuan in 2018, and it lost 76 million yuan in the first quarter of 2019.

Huzhou bank's second largest shareholder, 600704.SH, entered the market in 2019. It spent 378 million yuan on the 3.73 yuan / share capital increase, and ranked 10% in the Huzhou bank's second largest shareholder.

Statistics show that Zhongda is the largest supply chain integrated service provider in China. The controlling shareholder is Zhejiang state capital operation Co., Ltd., and the actual control is Zhejiang SASAC.

17 small and medium banks queue up IPO

In 2019, the financial stability and Development Committee of the State Council held several meetings to deepen the reform of small and medium banks, with a clear focus on supporting multi-channel supplementary capital for small and medium banks, optimizing capital structure and enhancing the ability to serve the real economy and resist risks.

Under the demand of capital replenish, small and medium-sized banks hope to improve their predicament through listing and financing.

According to Wind statistics, according to the statistics of twenty-first Century, 17 banks are queuing up IPO, of which Huzhou bank is "accepted", Shanghai rural commercial bank shares and Guangdong Shunde rural commercial bank have "feedback", and the other 14 are "pre disclosure updates". Of the 17, 10 will be landing on the motherboard and 7 will be landing on the SME board.

"Since the three quarter of 2019, the downward pressure on the economy has increased, and our country has been faced with a great pressure of credit contraction. Supplementing commercial banks' core capital is an important measure to ease credit contraction. It is very important for small and medium-sized banks to increase their capital and expand their stock market and increase their support for small and medium-sized banks. Therefore, it is necessary to strengthen the information disclosure to enhance the transparency of small and medium-sized banks and reduce the operational risks of small and medium-sized banks. At the same time, according to the relevant provisions of the Basel Agreement three, the overall capital adequacy ratio of small and medium-sized banks in China is lower than that of four state-owned banks and foreign banks. Taking IPO as the breakthrough point, it helps to highlight the main body of credit creation in China's small and medium banks, and encourages commercial banks to replenish capital through multiple channels," IPO said. "In 2019, Zheng Jiawei, chief analyst of securities banking in the new era, said.

He pointed out that for small and medium banks, the way to supplement core tier one capital mainly includes paid in capital, capital reserves, surplus reserves, profit retention, rights issue, issuance, IPO, convertible bonds and so on. As the refinancing relaxation policy is not implemented in the second half of 2019, the channels for the small and medium banks to supplement the core tier capital are not smooth, mainly through the issuance of preferred shares, convertible bonds and perpetual debts, but these methods are mainly directed against listed banks, and most non listed banks supplement the core tier one capital through this channel.

As for capital replenishment of commercial banks, he suggested that one should play the role of sustainable debt. "Sustainable debt has a trigger clause to supplement the capital of commercial banks, which can trigger writedowns and is a high-quality capital replenishment tool. In order to promote the liquidity of commercial banks issuing perpetual debt, the central bank has created CBS to incorporate qualified bank perpetual debt into the scope of central bank operating collateral, providing liquidity support to banks in issuing perpetual debt. As of the end of September 2019, China's commercial banks issued 455 billion yuan of perpetual debt, and another 17 commercial banks intend to issue more than 470 billion yuan in perpetual debt. Therefore, more commercial banks are encouraged to supplement tier one capital through issuing sustainable debt. Meanwhile, the central bank's CBS operation is of great significance for improving the liquidity of commercial banks' perpetual debts, improving the willingness of market participants to subscribe to banks' perpetual debts, and supporting banks to issue sustainable debt supplement capital.

Secondly, commercial banks can also supplement core tier one capital by issuing preferred shares, fixed increment and convertible bonds. In the future, there will be convertible two class capital bonds and capital debt instruments including regular stock conversion provisions, which will enrich commercial banks' supplementary level two capital instruments.