China Focus: China’s banking industry expected to unveil mixed ownership reform
BEIJING, June 2 (Greenpost) — Several Chinese banks have launched plans to optimize ownership structure or improve management framework by spinning off some business, signaling that China’s banking industry may unveil the curtain of mixed ownership reform in 2015.
Expectations for some banks’ mixed ownership reform moves have driven a new round of banking stocks rally recently, leading by shares of the Bank of Communications (BOCOM, 601328.SH; 03328.HK).
The BOCOM said in its semiannual report that “as a public company, the bank boasts a mixed ownership with state-owned capital, private capital and foreign capital, and the bank is actively drafting the plan to deepen the mixed ownership reform,” said a report from the Economic Information Daily on Tuesday.
Although BOCOM’s reform plan hasn’t been disclosed yet, the bank’s president Niu Ximing said early in the year that the state controlling structure framework would not be changed, but the inner ownership will be adjusted.
The Bank of Beijing (601169.SH) also disclosed in April the bank is making up employee stock ownership plan but it’s still in the initial stage. Meanwhile, China Merchants Bank (600036.SH) also said in April its board of directors approved its initial plan of employee stock ownership.
Moreover, Minsheng Bank (600016.SH) announced in November 2014 it would issue no more than 1,408 million A-shares and raise about 8 billion yuan for its employee stock ownership plan.
Zong Liang, vice director of the international financial research institute of the Bank of China, said mixed ownership reform is closely related to employee stock ownership, on the one hand, employees would be encouraged to be more efficient and on the other hand, employees would be able to share fruits of the reform and play the role of supervision as a shareholder.
The state-owned investment company Central Huijin Investment Ltd. has recently reduced its holdings in China’s top four banks, which is also believed to be a sign of the start of the ownership reform.
Central Huijin decreased its stakes in the Industrial and Commercial Bank of China (601398.SH; 01398.HK) and China Construction Bank (601939.SH; 00939.HK) from 46 percent to 45.89 percent and from 5.05 percent to 2.14 percent, respectively.
Ma Kunpeng, a banking analyst at Sinolink Securities, said through large transactions and directional transfer, state controlled shares would be taken over by private capital.
Besides ownership structure reform, experts suggest banks should be allowed to conduct investment in various ways to improve management framework. Yao Yudong, head of the financial research institute of the People’s Bank of China, said China could consider allowing banks to set up or invest in P2P finance, third-party payment or even e-commerce companies.
Everbright Bank (601818.SH) and SPD Bank (600000.SH) have launched plans to spin off their wholly owned subsidiaries of wealth management business. China Merchants Bank, Minsheng Bank and Industrial Bank (601166.SH) also reportedly have intentions to split their subsidiaries.
The market is generally optimistic about the industry’s ownership reform, Ma said. “The reform is likely to directly bring opportunity of valuation increase to banking stocks, and we expect to see big news as catalysts from June,” he said.
China’s A-share listed banks such as BOCOM, Bank of Beijing, Everbright Bank (601818.SH), SPD Bank (600000.SH) and Industrial Bank (601166.SH) would be the companies to watch. Enditem
Editor: Xuefei Chen Axelsson