(Yicai) Jan. 6 -- The equity transaction market of small- and medium-sized Chinese banks has cooled down, mainly because of great operating pressure and shrinking net interest margins.

Small and medium lenders' equities have been recently auctioned at discounted prices on internet platforms, with many of them even failing to attract any bidders, Yicai found.

The auction platform run by Alibaba Group Holding has 69 small and medium banks' equity transaction offers priced at CNY1 (13 US cents) per share, with most shareholders being individual investors. Sixty-two have not attracted a single participant, and 31 have failed in the past.

For example, no participant has registered so far for the auction of 50,000 shares at CNY1 apiece of Jiangxi Xinjian Rural Commercial Bank held by an individual shareholder. The offering is expiring tomorrow.

Another case is the auction for shares of Hubei Jingzhou Rural Commercial Bank held by an individual shareholder that failed for the second time on Jan. 5 despite having a starting price with a 20 percent discount.

The valuation of small and medium lenders remains on a downward path because of their small scale, weak risk prevention capabilities, and high potential debt risks, a banking industry insider told Yicai. The situation is then worsened by their overall narrowing net interest margins and firm operating pressure, which makes them less appealing to investors, the insider added.

The net interest margin of Chinese commercial banks stood at 1.53 percent as of Sept. 30 last year, down 1 basis point from June 30, according to data from the National Financial Regulatory Administration.

Moreover, the corporate governance and operational management capabilities of small and medium banks are relatively weak, so potential investors are less interested in becoming minority shareholders because it would be harder for them to influence the lenders' business decisions, the insider noted.

"The frequent failure of small and medium banks' equity auctions can be also related to the strategies of investment institutions," an auction industry insider told Yicai. "When there are many bank assets on the market, most buyers tend to wait for the second or even third auction, when larger discounts are usually offered."    

Editors: Tang Shihua, Futura Costaglione