Equity Sales Spike at China's Small, Mid-Sized Banks
Duan Siyu
/SOURCE : yicai
Equity Sales Spike at China's Small, Mid-Sized Banks

(Yicai Global) May 16 -- Regional small and medium banks are coming under greater operating pressure from emerging internet finance and large lenders encroaching into small towns.

The number of equity sales of small and medium banks has shot up in the asset trading market, up 55 percent per year, data from an auction platform shows.

Equity auction results returned by searching the keyword "bank" rose 55 percent from a year earlier to 1,239 as of May 14, with various auctions listed as ongoing, upcoming, ended, suspended and withdrawn, data from the online auction business platform of tech titan Alibaba Group Holding shows. Over 600 auctions have been bought in, meaning they went unsold and stayed the property of the seller.

Alibaba's platform is still not the mainstream venue for trading these assets, but rather local government finance exchanges, Zhao Yiyang, a senior researcher at Suning Institute of Finance under Nanjing-based retail giant Suning.Com, told Yicai Global.

There should thus be more equity sales of small and medium banks.

Growing Uncertainty

The value of banking licenses is also falling because of regulations that curb the business development of urban commercial banks, rural commercial banks and village banks and compensation from non-bank institutions, including fund companies and third-party payment companies, the head of the investment banking department at a private lender told Yicai Global, adding less competitive small and medium banks will face increasingly large uncertainty over development if they are unable to find timely growth momentum.

Affected by deleveraging, enterprises facing financial pressure have monetized their bank equities to ease tight liquidity. Some shareholders must auction off their bank shares because they are subject to margin calls on their share pledges, a staffer with a city commercial bank with branches in Jiangsu and Zhejiang provinces told Yicai Global.

Bank shareholders participating in auctions are usually minor ones and their equity transactions do not affect banks' controlling shareholders and operations, however, Xue told Yicai Global.

Investors must seek approval from regulators in advance if they buy over 5 percent of a bank's total shares, and report afterwards if they take between 1 percent and five percent, under current rules.

Editor: Tang Shihua, Ben Armour

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Keywords: Asset Auction , Banks