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Jiangyin Bank pitches in with IPO plans

(China Daily/Agencies)
Updated: 2009-08-13 12:40

China's Jiangsu Jiangyin Rural Commercial Bank plans to raise several billion yuan in an initial public offering (IPO) in Shanghai next year to fund expansion, two people with direct knowledge of the plan said on Tuesday, according to a Reuters report.

Jiangyin Bank, based in Jiangsu province, submitted an IPO application late last year and is waiting for regulatory approval.

Everbright Securities is arranging the share sale, said the people, who declined to be named as they were not authorized to speak to the media.

Jiangyin Bank is vying with Shanghai Rural Commercial Bank, partly owned by Australia & New Zealand Banking Group, to become China's first listed rural lender.

Foreign lenders including HSBC Holdings Plc, Citigroup Inc and Standard Chartered Bank have set up rural financial institutions in China as the government encourages rural financing to help farmers and small businesses.

"In places like Jiangyin the rural economy is vibrant, with many small businesses that are growing rapidly," said Liu Jun, analyst, Changjiang Securities. "Rural lenders have the potential to compete directly with city lenders as they grow bigger."

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Going public could also help Jiangyin Bank to expand through acquisitions. The lender last year bought a 10 percent stake in Jinjiang Rural Cooperative, and owns a controlling stake in two rural lenders in Sichuan province.

Jiangyin Bank was formed in 2001 as part of China's financial reforms in the countryside aimed at narrowing the wealth gap between urban and rural areas.

The lender, with 30 branches and 67 smaller outlets, extends loans mainly to small businesses and hi-tech firms, according to its website.

Jiangyin Bank's net profit rose 20 percent in 2008 to 598 million yuan ($87.55 million) on revenue that increased 39 percent to 1.36 billion yuan, as the global economic slowdown created hardships for many exporters and its margins shrank. The bank had total assets of 32 billion yuan at the end of last year.

Despite Jiangyin Bank's moves in the capital market, many rural commercial banks are still steps away from listing themselves on the A-share market, analyst said.

"In aspects of corporate governance, risk management, and network building, rural commercial banks are still fledging, and incomparable to city commercial banks," said Fu Lichun, analyst, Southwest Securities.

"Rural commercial banks have less motivation for network expansion considering they are still in the very early stages of development, " Fu said.