According to the news on the website of the China Securities Regulatory Commission, the 43rd meeting of the Issuance Review Committee of the China Securities Regulatory Commission in 2022 was held on April 14, 2022, and according to the audit results, Jiangsu Dafeng Rural Commercial Bank Co., Ltd. (initial offering) was not approved.
If the bank voluntarily withdraws its IPO application, Dafeng Rural Commercial Bank became the first bank to be rejected for an IPO. What are the reasons behind the listing of "broken dreams"? Is this case a case or a common phenomenon, and what kind of signal is released? For other small banks, can the "small goal" of listing be achieved?
01
Scale "mini": total assets of 50 billion yuan
Dafeng Rural Commercial Bank was formerly known as Dafeng Rural Credit Cooperatives United Society, which was transformed into Dafeng Rural Cooperatives in 2004. In November 2011, Dafeng Rural Commercial Bank was officially established.
Looking back at the road of IPO of Dafeng Rural Commercial Bank, in November 2017, the IPO application of Dafeng Rural Commercial Bank was accepted, in March 2018, the CSRC disclosed the feedback on the initial offering, and in May of that year, the prospectus of Dafeng Rural Commercial Bank was updated, and there has been no progress since then. However, after four years, the listing of Dafeng Rural Commercial Bank finally failed to achieve its wishes, and the end ended in failure.
Yi Mingjun found in the inventory that in the four years that Dafeng Rural Commercial Bank was queuing, the A-share banking sector expanded rapidly to 42. During this period, a total of 17 banks were successfully listed on the A-share market, including Zijin Bank and Bank of Suzhou, which are in Jiangsu territory with Dafeng Rural Commercial Bank, and Shanghai Rural Commercial Bank, Chongqing Rural Commercial Bank, Qingdao Rural Commercial Bank and Ruifeng Bank, which are also in the category of rural commercial banks.
Compared with the above-mentioned banks, the asset scale of Dafeng Rural Commercial Bank is significantly smaller; compared with the head listed banks, Dafeng Rural Commercial Bank is even more "mini". In terms of scale, the total assets of Dafeng Rural Commercial Bank at the end of 2021 were only 53.975 billion yuan. At present, the bank with the smallest A-share asset scale is Ruifeng Bank, with total assets of 136.868 billion yuan at the end of the period, which is 2.5 times the asset scale of Dafeng Rural Commercial Bank.
However, "mini" is not original sin. Judging from the announcement of the audit results, the focus of the CSRC's issuance and review committee is more on the competitiveness of Dafeng Rural Commercial Bank itself, the quality of assets and the effectiveness of relevant internal control measures, and the relationship with the Jiangsu Provincial Associated Press.
02
Listing denied: Three aspects of the problem are concerned
Dafeng Rural Commercial Bank's business is mainly concentrated in Dafeng District, Yancheng City, Jiangsu Province, and it is highly dependent on the regional economy, which is also a fundamental factor in its small asset size and slow growth. Due to the high degree of regional concentration and industry concentration of the business, its core competitiveness has become the focus of the NDRC.
First of all, according to the requirements of the NDRC, the bank needs to explain whether it has a relatively comprehensive competitiveness and the measures and effectiveness taken to enhance the core competitiveness in combination with the regulatory policies of the rural commercial bank's cross-regional exhibition industry and the regional economic development trend.
According to the annual report of Dafeng Rural Commercial Bank, from 2018 to 2021, the bank achieved operating income of 1.198 billion yuan, 1.216 billion yuan, 1.259 billion yuan and 1.333 billion yuan respectively, an increase of 22.45%, 1.53%, 3.54% and 5.87% year-on-year; net profit income was 470 million yuan, 509 million yuan, 510 million yuan and 573 million yuan, an increase of 9.08%, 8.47%, 0.05% and 12.33% year-on-year.
From the perspective of income structure, "eating interest spreads" is still the most important source of income for Dafeng Rural Commercial Bank. In 2021, the bank achieved net interest income of 1.243 billion yuan, an increase of 7.67% year-on-year, accounting for about 93.3% of the current revenue. In contrast, the intermediate business performance of Dafeng Rural Commercial Bank is relatively inferior. From 2019 to 2021, the bank's net fee and commission income was -45.6252 million yuan, -36.0716 million yuan and -340.186 billion yuan, which was negative for three consecutive years.
However, in the context of interest rate marketization, the banking industry has been in a narrowing environment of net interest margin in recent years, and it will still show a downward trend in the future, which means that the future interest income growth of the banking industry will be more weak. In view of this, the NDRC requested Dafeng Rural Commercial Bank to combine net interest margin and net interest yield below the average level of comparable companies in the same industry, indicating that under the continuous downward trend of interest rates in the mainland, maintaining sustained profitability is a more critical consideration.
Secondly, in terms of asset quality and internal control, the NDRC requires the bank to explain the impact on the issuer's asset quality in light of external factors such as the economic operation of the issuer's main place of operation and the impact of the new crown epidemic in the reporting period; in light of the migration of various types of loans of the issuer, explain the effectiveness of the implementation procedures of the five-level classification and related internal control measures, and whether the provision for loan impairment is sufficient; and explain the reasons why the loan balance of some group customers exceeds the total amount of credit granted, and whether the relevant internal control system is effectively implemented Explain whether the personal savings deposit collection is legal and compliant, and whether the growth of time savings deposits is sustainable.
According to the data disclosed by Dafeng Rural Commercial Bank, as of the end of last year, the balance of non-performing loans of the bank was 381 million yuan, and the non-performing rate was 1.07%, down 0.03 percentage points from the previous year; the provision coverage ratio was 331.40%, up 5.93 percentage points from the beginning of the year. The capital adequacy ratio fell by 0.33 percentage points from 15.08% at the beginning of the year to 14.75%.
Third, the NDRC requested it to explain its relationship with the Jiangsu Provincial Associated Press, as well as whether the responsibilities and management of the issuer's board of directors, appointment of senior executives, daily supervision, operation management, risk management, development and construction of important information systems, and operation and maintenance management of the issuer affected the independence of the issuer and the fairness of information disclosure. At the same time, it is also required to explain the investment and other capital transactions between the issuer and the Jiangsu Provincial Associated Press in the reporting period, the relationship between creditor's rights and debts, whether there is a situation of management fee sharing; the decision-making procedures, pricing mechanism and disclosure of the issuer's related party transactions during the reporting period, whether it involves the occupation of funds by related parties, and whether the issuer's operating income or net profit is significantly dependent on related parties.
03
It is not easy for small and medium-sized banks to seek listing
In fact, Dafeng Rural Commercial Bank is not the only bank that failed to list during the year. As early as February this year, Xiamen Rural Commercial Bank withdrew its listing application. In this regard, Xiamen Rural Commercial Bank responded that the adjustment of the listing plan is based on the purpose of equity optimization, and is intended to use the adjustment period to focus on sorting out and optimizing equity, so as to lay a solid foundation for the next step of steady development and re-application for listing.
Since 2017, a number of banks, including Shengjing Bank, Huishang Bank, Harbin Bank, Weihai City Commercial Bank, Guangzhou Rural Commercial Bank, etc., have withdrawn their listing applications. From the perspective of the reasons for its withdrawal, it mainly involves equity issues and the adjustment of the company's internal strategic planning.
Judging from the phenomenon that the IPO of Dafeng Rural Commercial Bank was rejected and many banks voluntarily withdrew their listing applications, it is not easy for small and medium-sized banks to seek listing.
With the listing of national banks and some larger and better qualified urban commercial banks and rural commercial banks in the early stage, the small and medium-sized banks that are ready to be listed later will face more stringent inspections. Judging from the announcement of the NDRC, sustainable profitability, asset quality and anti-risk ability, effective internal control measures and perfect corporate governance are the focus of attention, which are also the "hard wounds" commonly found in small and medium-sized banks.
In fact, the DRC's concerns are not unfounded. According to the central bank's rating results of 4398 banking financial institutions in the fourth quarter of last year, on the whole, most of the institutional rating results are within the safety boundary (1-7 grades), and 316 "red zone" (8-D) institutions are mainly concentrated in agricultural cooperative institutions and village and town banks. Among them, there are 186 high-risk institutions in rural cooperative institutions (including rural commercial banks, rural cooperative banks, and rural credit cooperatives), and 103 high-risk institutions in village and township banks.
At present, there are still 10 A-share banks waiting in line for IPOs, among which Huzhou Bank, Bozhou Yaodu Rural Commercial Bank, Jiangsu Haian Rural Commercial Bank and Jiangsu Kunshan Rural Commercial Bank intend to break through the IPO of the main board of the Shanghai Stock Exchange; Bank of Guangzhou, Dongguan Bank, Chongqing Three Gorges Bank, Anhui Ma'anshan Rural Commercial Bank, Guangdong Nanhai Rural Commercial Bank and Guangdong Shunde Rural Commercial Bank intend to apply for listing on the main board of the Shenzhen Stock Exchange.
Answering and solving the problems of core competitiveness, anti-risk ability, internal control and corporate governance effectiveness will become the key to determining whether they can go public or not.
The copyright of this article belongs to the "NEW Caijin" WeChat public account (gh_8a11848263a3), and it may not be reproduced or modified without authorization.
For cooperation or reprint, please call the 18516883019 or email [email protected].