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Agricultural Bank won't cut staff or branches before IPO

(Agencies)
Updated: 2009-04-22 14:42

Agricultural Bank of China (ABC), the only big State lender that has yet to float its shares, will resist pressure to cut its huge workforce and sprawling branch network in the run-up to a public listing.

Chairman Xiang Junbo said ABC would keep its 450,000 employees and 24,400 outlets out of a sense of social duty, even though scaling back would help the lender to reduce costs.

"We believe we can handle this problem through business development and reform. This is another challenge for us but also our responsibility," he said in an interview with The Asian Banker magazine, which was published on Wednesday.

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Chinese banks have so far avoided layoffs, although the global financial crisis has forced many Western financial firms to cut jobs.

Xiang said his per capita staff costs were much lower than at other big Chinese banks because half of ABC's workforce was in rural areas where living costs are not as high.

ABC's deep rural roots offered growth potential for the bank, he said. Lending rates in the countryside are about 10-12 percent above the benchmarks set by the central bank, while in cities they are usually lower than the benchmarks, he noted.

In addition, the Ministry of Finance will give tax breaks to domestic and foreign banks doing business in rural China.

Under a pilot project launched in six provinces, any bank that increases its agricultural loan book by more than 15 percent in a year is eligible for a risk subsidy amounting to 2 percent of the extra loans, Xiang said.

Without setting a deadline, he said ABC aims to increase farm-related loans to half of its lending from one-third now.

Xiang said he would like to bring on board a strategic investor that has been able to withstand the global financial crisis and has experience in rural, agricultural or micro-finance lending.

However, ABC has yet to settle on a suitor. Nor has it decided the exact timing for its initial public offering, Xiang said.

Teaming up with a foreign strategic investor prior to a public listing was the model followed by China's other major State lenders. However, it is not clear whether ABC will tread the same path because the credit crunch has taken a heavy toll on financial institutions worldwide.

Beijing recently announced an extension of the lock-up period for new strategic investors in Chinese banks, to five years from three, after Royal Bank of Scotland, UBS and Bank of America sold their stakes at the first opportunity to rebuild their depleted capital.

Central Huijin, the domestic investment arm of China's sovereign wealth fund, owns half of ABC following a $19 billion capital injection in November. The Finance Ministry owns the other half.