The burden of non-performing assets transferred by fixed increase? Up to 1:1.5: new ways for banks

category:Finance
 The burden of non-performing assets transferred by fixed increase? Up to 1:1.5: new ways for banks


15 small and medium-sized banks plan to increase 22.7 billion yuan in the year

As the second largest bank approved in the year, the Bank of Zhengzhou has been waiting for a full year from the proposal to the approval.

On July 17 last year, the Bank of Zhengzhou announced that it planned to issue no more than 1 billion A-shares and raise no more than 6 billion yuan to supplement core tier one capital.

The non-public offering objects disclosed at that time were no more than 10 specific investors, including Zhengzhou holding, Bairui trust, Guoyuan trading, etc. Among them, the number of shares subscribed by Zhengzhou holding company is no less than 171.5 million shares; the subscription amount of berry trust is no more than 860 million yuan and no less than 660 million yuan; the subscription amount of Guoyuan trade is not more than 600 million yuan and not less than 450 million yuan.

In January this year, the bank received 12 questions from the China Securities Regulatory Commission (CSRC) on the capital increase plan, including capital sources, related party transactions and corporate governance, financial management business risk, interbank business risk, off balance sheet business risk, etc.

Compared with other listed banks, Zhengzhou bank has greater pressure on capital replenishment. Among the A-share listed banks, Zhengzhou banks core tier one capital adequacy ratio is far below the average level, ranking second from the bottom.

According to the financial report, the core tier one capital adequacy ratio of Bank of Zhengzhou in 2018, 2019 and the first quarter of this year were 8.22%, 7.98% and 7.95%, respectively, gradually approaching the regulatory red line of 7.5%. In addition, the non-performing loan ratio in the same period was 2.47%, 2.37% and 2.35%, which was one of the only two listed banks with a NPL ratio of more than 2%.

In March this year, the Bank of Zhengzhou issued the fixed increase plan (Revised Version), which pointed out that, based on the data calculation at the end of 2019, assuming that the total amount of funds raised in this issuance is 5.2 billion yuan, the core tier 1 capital adequacy ratio, tier 1 capital adequacy ratio and capital adequacy ratio will be increased from 7.98%, 10.05% and 12.11% to 9.21%, 11.26% and 13.29% respectively after the issuance.

According to the capital classification in the administrative measures of commercial banks, equity financing can directly supplement the primary capital. In addition to profit retention, listed financing, convertible bonds, fixed increase is the main way to supplement the core tier one capital, which has been favored by many small and medium-sized banks in urgent need of blood supply.

According to the announcement, 22 small and medium-sized rural banks were approved by the China Securities Regulatory Commission (CSRC), with a total amount of RMB 1.5 billion and RMB 0.3 billion as of the date of this year.

Among them, the three city commercial banks, Hangzhou bank, Zhengzhou bank and Fuxin bank, are planned to raise 7.2 billion yuan, 6 billion yuan and 2.34 billion yuan respectively; among the 11 rural commercial banks, the highest is Foshan rural commercial bank, which plans to raise 2.013 billion yuan; the lowest is Kunshan Lucheng Village bank, which plans to raise 35.358 million yuan. It can be found that the purpose of fund-raising is to supplement the banks primary capital and to dispose of non-performing assets.

In addition, there are six banks that have submitted the directional offering instructions (application draft), but have not been approved, including Zhangjiakou bank, Liaoning Dalian bank, Jiangxi Guangxin agricultural commercial bank, Hebei Yangyuan agricultural commercial bank, Qingdao mutual group agricultural commercial bank and Jincheng agricultural commercial bank. In addition, Changsha bank and Guiyang bank are also promoting the relevant fixed increase plan.

Five banks regulatory indicators exceeded the red line

In addition, according to the core risk supervision indicators of commercial banks (for Trial Implementation), the non-performing loan ratio should not be higher than 5%. According to the document issued by the CIRC in March 2018, the regulatory requirements for provision coverage ratio are adjusted from 150% to 120% - 150%, and the regulatory requirements for loan provision ratio are adjusted from 2.5% to 1.5% - 2.5%.

According to the statistics issued by Chinese correspondents of securities companies, among the 15 banks approved for the fixed increase plan in the first half of the year, the regulatory indicators of five banks exceeded the red line.

From the perspective of capital adequacy ratio, non-performing loan ratio and provision coverage ratio, Jiangxi Fengxian rural commercial bank, Peixian agricultural commercial bank, Guangfeng agricultural commercial bank and Zezhou agricultural Commercial Bank of Shanxi Province are all below the standard. In addition, the provision coverage rate of Jiangxi Gongqing agricultural commercial bank is not up to the standard.

According to the directional instructions, the core tier 1 capital adequacy ratio of Fengxian rural commercial bank in 2017, 2018 and September 2019 were 9.75%, - 8.50% and - 4.20%, respectively; the non-performing loan ratio was 4.75%, 16.17% and 11.24%; the provision coverage rate was 104.54%, 40.43% and 29.58%.

In response to the inquiry from the CSRC, Fengxian rural commercial bank pointed out that it had not been subject to regulatory measures or administrative penalties by the banking regulatory authorities because some regulatory indicators did not meet the regulatory requirements. As of the end of September 2019, the main regulatory indicators have improved significantly compared with the beginning of the year, and there will be no risk of being punished due to the regulatory indicators failing to meet the regulatory requirements.

In September 2017, 2018 and September 2019, the core tier 1 capital adequacy ratio of Peixian rural commercial bank was 10.52%, - 20.49% and - 7.97%, the non-performing loan ratio was 7.97%, 24.90%, 16.21%, and the provision coverage rate was 77.49%, 9.79% and 16.59%.

In response to the inquiry from the CSRC, Peixian agricultural commercial bank said that the non-performing loans were mainly concentrated in the manufacturing industry, wholesale and retail industry, agriculture, forestry, animal husbandry and fishery. Among them, the manufacturing industry is affected by the economic downturn and the adjustment of national industrial policies, resulting in overcapacity, poor business operation and even loss; the wholesale and retail industry is affected by the low level of macroeconomic operation, coupled with its own limited management level and poor management; agriculture, forestry, animal husbandry and fishery are more vulnerable to natural factors such as floods and droughts, and their ability to resist risks is weak and it is difficult to recover funds u3002

The core tier one capital adequacy ratio of Shanxi Zezhou rural commercial bank in 2018, 2019 and 2020 March were 8.23%, 7.95% and 7.37%, respectively; the non-performing loan ratio was 5.82%, 5.41% and 5.78%; the provision coverage rate was 81.91%, 100.82% and 88.32%.

In March 2018, 2019 and 2020, the core tier 1 capital adequacy ratio of Guangfeng agricultural commercial bank was 10.24%, 6.86% and 5.71%, the non-performing loan ratio was 20.96%, 8.29%, 10.99%, and the provision coverage rate was 43.30%, 61.33% and 59.56%.

In view of the negative net profit of the company for many years, Guangfeng agricultural commercial bank said that it was mainly due to the large amount of asset impairment loss since 2018, which offset the companys operating profit. The main reason for a large number of asset impairment losses is that after June 2018, the company strictly classified according to the five level classification standard, including all loans with principal or interest overdue for more than 90 days into non-performing loans, and the growth of non-performing loans led to the increase of provision for loan loss.

In the process of examination and approval, the CSRC paid attention to the issue price of the directional offering of Guangfeng agricultural commercial bank is 2 yuan / share, and it is planned to raise no more than 180 million yuan. Through telephone communication, the issuer used 90 million yuan to purchase non-performing assets, but the application materials were not explained.

In this regard, Guangfeng agricultural commercial bank said that the issue price and total amount of raised funds did not include the purchase of non-performing assets, of which 1 yuan / share (90 million yuan in total) was used as capital to enrich capital, enhance the ability to resist risks and development momentum; the other 1 yuan / share (90 million yuan in total) was included in the capital reserve.

In fact, in addition to Guangfeng rural commercial bank, there are also small and medium-sized banks that have been asked about tying bad assets in the fixed increase plan.

Three rural commercial banks sell non-performing assets with fixed increase

It is worth noting that from the first half of this year, fixed increase bundling sales of non-performing assets package has become a new play for some agricultural commercial banks to digest non-performing assets.

Wu Wen, a senior researcher at the financial research center of Bank of communications, pointed out that the majority of non-performing assets sold by fixed increase are small banks, which are not very common. The reason is that small banks have great pressure on asset quality in recent two years, and at the same time, they are facing urgent pressure of capital replenishment.

There are three banks approved for the fixed increase plan of tying non-performing assets. The agricultural Commercial Bank of Guangdong Sihui and the agricultural Commercial Bank of Zezhou in Shanxi Province are directly approved. One bank is Shandong Zhucheng rural commercial bank after being inquired by the CSRC.

Shandong Zhucheng rural commercial bank replied that the statement of the issuance plan as the issuance price of 2 yuan / share and the total amount of raised funds not exceeding 300 million yuan was inaccurate. The company has determined that the price of this directional issue is RMB 1.00/share, and the total number of shares to be issued is no more than 150 million shares. The targeted issue object must pay RMB 1.00/share for purchasing the companys non-performing assets while subscribing for the shares.

When the asset quality of small and medium-sized banks is declining, fixed increase in the sale of non-performing assets can speed up the disposal, which can not only make banks supplement capital, improve the capital adequacy ratio, but also solve the problem of non-performing loan stock disposal to a certain extent. Pan Helin, executive director of the Digital Economy Research Institute of Central South University of economics and law, said that on the other hand, small and medium-sized banks, especially agricultural commercial banks, are facing two major problems: insufficient capital and declining asset quality.

When the banks operating environment is better and the equity is being scrambled, there are also cases of tying bad assets. A bank official from a joint-stock bank said that the banks non-performing assets package may involve houses, land, automobiles and securities, etc. for banks, loan write off needs to meet various conditions, and through tie-in, the disposal of non-performing assets can be realized without verification and loss of profits. From the data of CBRC, in the first quarter of this year, the non-performing rate of rural commercial banks increased, and the capital adequacy ratio went down. The non-performing rate increased from 3.9% in the fourth quarter of last year to 4.09%, and the increase of 0.19 percentage point of non-performing rate ranked first in all bank classifications; the capital adequacy ratio decreased from 13.13% to 12.81%. A spokesperson for the China Banking and Insurance Regulatory Commission (CIRC) said recently that it is necessary to continue to strengthen the handling of non-performing loans in order to prepare for a sharp rebound in non-performing loans. This year, the amount of disposal of non-performing assets should be reasonably increased on the basis of last year. In addition, we should broaden the channels for the disposal of non-performing assets, and comprehensively use the means of verification, collection, batch transfer and debt to equity swap. Source: securities companies China editor: Yang Qian_ NF4425

When the banks operating environment is better and the equity is being scrambled, there are also cases of tying bad assets. A bank official from a joint-stock bank said that the banks non-performing assets package may involve houses, land, automobiles and securities, etc. for banks, loan write off needs to meet various conditions, and through tie-in, the disposal of non-performing assets can be realized without verification and loss of profits.

From the data of CBRC, in the first quarter of this year, the non-performing rate of rural commercial banks increased, and the capital adequacy ratio went down. The non-performing rate increased from 3.9% in the fourth quarter of last year to 4.09%, and the increase of 0.19 percentage point of non-performing rate ranked first in all bank classifications; the capital adequacy ratio decreased from 13.13% to 12.81%.

A spokesperson for the China Banking and Insurance Regulatory Commission (CIRC) said recently that it is necessary to continue to strengthen the handling of non-performing loans in order to prepare for a sharp rebound in non-performing loans. This year, the amount of disposal of non-performing assets should be reasonably increased on the basis of last year. In addition, we should broaden the channels for the disposal of non-performing assets, and comprehensively use the means of verification, collection, batch transfer and debt to equity swap.