Reproduce the IPO misfire of small and medium-sized banks with cancellation

Source: Beijing Business Daily

The IPO of small and medium-sized banks encountered another setback. With the disclosure of an announcement made by the Shanghai Stock Exchange, the A-share main board listing journey of Hai'an Rural Commercial Bank officially ended. On June 27, a reporter from Beijing Business Daily found that the IPO review status of Hai'an Rural Commercial Bank had changed to "terminated" according to the information query on the official website of Shanghai Stock Exchange. This local bank in Jiangsu Province has been listed for seven years. Looking back this January, Bozhou Yaodu Rural Commercial Bank also chose to withdraw its listing application. From January 17, 2022 Lanzhou Bank Since its listing, the IPO of small and medium-sized banks has been "dumb" for 29 consecutive months.

　　 Voluntary withdrawal

On June 26, the Shanghai Stock Exchange issued the Decision on Terminating the Review of the Initial Public Offering of Jiangsu Hai'an Rural Commercial Bank Co., Ltd. and Listing on the Main Board of Shanghai Stock Exchange, stating that the bank and the sponsor Guotai Jun'an Securities Co., Ltd. submitted relevant materials to Shanghai Stock Exchange and applied for withdrawal of application documents.

In accordance with the relevant provisions of Article 63 of the Review Rules of Shanghai Stock Exchange for the Issuance and Listing of Shares, Shanghai Stock Exchange decided to terminate the review of Hai'an Rural Commercial Bank's initial public offering of shares and listing on the main board of Shanghai Stock Exchange.

According to the prospectus, the proposed public offering of Hai'an Rural Commercial Bank will not exceed 328 million shares, all of which will be new shares, and will not involve the public offering of shares by shareholders. After deducting the issuance expenses, the funds raised from this issuance will be used to supplement the bank's capital, so as to improve its capital adequacy and enhance its comprehensive competitiveness.

As a local county agricultural commercial bank in Jiangsu Province, Hai'an Rural Commercial Bank has been queuing for listing for seven years. Since December 2016, Hai'an Rural Commercial Bank has started the listing guidance process, and released the pre disclosure declaration draft in June 2018. After the implementation of the comprehensive registration system, Hai'an Rural Commercial Bank completed the translation work last March.

However, after that, the listing process of Hai'an Rural Commercial Bank did not show any obvious signs of progress. On the contrary, because the financial statements exceeded the prescribed timeliness requirements, the listing status was adjusted to "suspended".

Behind the stagnant listing process is the current situation of Hai'an Rural Commercial Bank under pressure. According to the data of the bank's annual report in 2023, the bank's operating revenue in 2023 will be 2.023 billion yuan, down 0.43% year on year; The net profit was 861 million yuan, with a year-on-year increase of 4.64%, and there was no increase in profits or revenues; The net interest margin will decrease from 2.5% in 2020 to 2.02% at the end of 2023.

For most local small and medium-sized banks, too high loan concentration is an inevitable problem. Although the 2023 annual report does not disclose the detailed balance of single customer loans, in the prospectus, Hai'an Rural Commercial Bank said that, from the perspective of customer distribution, as of June 30, 2022, the balance of the bank's loans to the largest single customer was 207 million yuan, Accounting for 2.39% of the bank's net capital; The balance of loans granted to the top ten customers was 1.772 billion yuan, accounting for 20.46% of the bank's net capital.

Hai'an Rural Commercial Bank said that it strengthened the unified credit management and controlled the issuance of large single loan. In principle, it required that the new single loan should not exceed a certain limit, and those exceeding the limit should disperse the concentration risk by means of syndicated loans. If the quality of any non non-performing loans in the loans granted by the Bank to the top ten customer borrowers becomes poor or become non-performing loans, the financial condition and operating performance may be adversely affected.

In response to the reasons for withdrawing the listing application, the reporter of Beijing Business Daily contacted the bank several times for interviews, but as of press release, no reply was received.

According to the analysis, the current operating conditions and loan structure characteristics may be the main reason for Hai'an Rural Commercial Bank to withdraw its listing application. In the view of Wang Jianhui, a senior researcher of industrial economy, in the current economic environment, small and medium-sized banks are facing many challenges in their pursuit of listing. The primary obstacle lies in the performance pressure. The global economic slowdown and domestic economic restructuring have put the traditional growth model of the banking industry to the test. The expectation of continuous growth is difficult to maintain, and the financial data may be unsatisfactory. Compared with peers who have successfully listed previously, small and medium-sized banks that have recently tried to list may have more prominent operational disadvantages due to different economic cycles, and it is difficult to attract sufficient interest and financial support from the market.

　　 Continuation of "empty window period"

Reviewing the IPO situation of banks in recent years, it is not too bad to describe it as sluggish and dumb. After the successful listing of Bank of Lanzhou in January 2022, the IPO of banks fell into stagnation, with frequent withdrawal and termination. No bank will be listed in 2023; In 2024, in addition to Hai'an Rural Commercial Bank, Bozhou Yaodu Rural Commercial Bank and its sponsor withdrew their listing application in January.

According to the statistics of the Beijing Business Daily reporter, up to now, there are 8 banks waiting for listing, and there are 3 main boards of Shanghai Stock Exchange, namely Huzhou Bank, Hubei Bank, Kunshan Rural Commercial Bank. Except that the review status of Huzhou Bank is "inquired", the rest of the banks are "accepted". There are five main boards of Shenzhen Stock Exchange, namely Ma'anshan Rural Commercial Bank, Bank of Guangzhou, Shunde Rural Commercial Bank, Nanhai Rural Commercial Bank and Dongguan Bank. The review status is "suspended". The reason for the suspension is that the financial information recorded in the IPO application documents has expired and needs to be supplemented.

Under the registration system, the market pays more attention to the operation standardization, sustainable profitability and potential growth of small and medium-sized banks. Analysts believe that some small and medium-sized banks have internal governance structure defects such as complex equity structure, excessive concentration of equity, complex related party transactions, and need rectification to meet the listing requirements; In addition, changes in the economic environment have put pressure on the operation of small and medium-sized banks, such as the narrowing of net interest margin, the rise of non-performing loan ratio, and the decline of profitability, resulting in poor financial performance, and also difficult to meet the profitability and growth requirements of listing.

Bai Wenxi, vice chairman of China Enterprise Capital Alliance, believes that the pace of bank listing has slowed down, which may be mainly due to the weakening market demand for bank shares, stricter regulatory requirements and insufficient conditions of banks themselves. On the one hand, the weakening of market demand for bank stocks may be due to the lack of confidence of investors in high-risk bank stocks. On the other hand, the regulatory requirements are stricter, and banks need to meet stricter listing conditions and regulatory requirements, which increases the difficulty and cost of listing. At the same time, the bank's own conditions may be insufficient, and it needs to further improve and improve its own operation and management level.

"For small and medium-sized banks, the difficulty of listing is mainly how to prove their profitability, credit level and risk control ability." Bo Wenxi further pointed out that in the current economic environment, the bank's listing strategy may need to make some adjustments. First, banks need to strengthen their own risk management to adapt to a more stringent regulatory environment. Secondly, banks need to improve their service level and efficiency to adapt to changes in market demand. Finally, banks need to strengthen their innovation ability to adapt to the development trend of financial technology. Therefore, small and medium-sized banks need to combine their own actual situation and market environment to develop their own listing strategies.

"The banking industry has occupied a relatively high share in the A-share market, and the market has limited capacity to absorb new bank shares, which urges small and medium-sized banks to be more diversified in their financing strategies. Instead of relying solely on equity financing, they should explore various means such as bond issuance and asset securitization to ensure adequate capital," Wang Jianhui further stressed that in the long run, The development strategy of small and medium-sized banks should be more prudent and refined. They need to closely follow the market trend, timely adjust their business layout, focus on building differentiated competitive advantages, accurately serve specific customer groups, and not blindly pursue scale expansion. Only through refined management and improved service quality and efficiency can small and medium-sized banks effectively respond to current challenges and lay a foundation for sustainable development in the future.

Beijing Business Daily reporter Song Yitong