Chinese small lenders are pulling their applications for initial public offerings and delisting, even as overall share sales have recovered and bank stocks surged, underscoring the the profit challenges still faced by the sector.
Guangdong Shunde Rural Commercial Bank Co. has withdrawn its application to float shares on China’s Shenzhen Stock Exchange, according to a filing on Friday. The move, which followed a similar action by Bank of Guangzhou Co. in January, marks the second this year and leaves just five banks still queuing up for IPO in the mainland.
The retreat isn’t limited to onshore markets. Jilin Jiutai Rural Commercial Bank Corp. said last week it will delist from the Hong Kong Stock Exchange after completion of a takeover bid. Bank of Jinzhou Co. ceased trading on the bourse in April, marking the first-ever Hong Kong delisting by a mainland Chinese bank.
China’s smaller lenders face mounting pressure to maintain sound financials amid declining margins that’s hurt even bigger state banks. Given their struggles, rural lenders are being left out of an IPO recovery in both the mainland and Hong Kong markets. Investors have poured money into shares of the nation’s biggest lenders betting on stable dividends. A gauge of Hong Kong-listed Chinese banks rose to the highest in more than seven years late last month.
“The IPO progress of small and medium-sized banks has been unsuccessful for years, as regulatory authorities had been quite strict in such approvals” given the profit growth concerns, said Liao Zhiming, chief fixed income analyst at Huayuan Securities Co. “Most of the financially strong banks have already gone public.”
Rural commercial banks have struggled to maintain margins. While benchmark interest rates have declined, deposit costs remain sticky as lenders compete for savings. The net interest margin of rural commercial banks fell from 1.73% at the end of 2024 to 1.58% by March 2025, underscoring the sector’s vulnerability.
Even so, some rural lenders including Shanghai Rural Commercial Bank Co. and Qingdao Rural Commercial Bank Corp. have jumped more than 20% this year in mainland trading.
China is in the process of merging small lenders, many of which are considered risky with weak governance and little transparency, to safeguard its financial stability, making their standalone existence less significant.
The banking regulator, National Financial Regulatory Administration, approved about 200 small and medium-sized banks to be merged or dissolved in the first half of 2025. An effort to consolidate the nation’s rural credit cooperatives also saw hundreds of such institutions being combined into bigger entities over the past few years.
This article was generated from an automated news agency feed without modifications to text.
