Australians buying into Jinan city bank
By Zhang Dingmin (China Daily)
Updated: 2004-11-19 10:01

The Jinan City Commercial Bank (JNCCB), a regional lender in East China's Shandong Province, has won regulatory approval to sell a 11 per cent stake to the Commonwealth Bank of Australia (CBA).

JNCCB said yesterday the China Banking Regulatory Commission (CBRC) approved its strategic co-operation plan with the CBA earlier this month, which will also give the Australian lender an option to purchase up to a total of 20 per cent of its shares by May 14, 2008.

CBA will have one seat on the board of the Chinese bank, which has 1 billion yuan (US$120 million) in shareholders' equity.

JNCCB and the Xi'an City Commercial Bank, based in Northwest China's Shaanxi Province, are among the few city commercial banks that have reported progress in ushering in foreign investors.

The CBRC is promoting restructuring of the nation's 112 city commercial banks, trying to resolve their financial risks and enhancing their role in supporting local economies and the millions of small and medium-sized enterprises.

The CBRC said earlier this year it would encourage private Chinese investors and foreign investors to buy into the nation's joint-stock commercial banks, including city commercial banks, to help them grow stronger. On Tuesday, the commission said it had promulgated its first guidelines on the regulation and development of city commercial banks in an effort to accelerate the reform and development of the regional lenders.

JNCCB ranks the eighth in terms of shareholder equity among China's 112 city commercial banks, which are joint-stock banks operating on a regional basis.

Its total assets have expanded by more than five times since its establishment in 1996, while share capital rose to 1 billion yuan (US$120 million) from 250 million yuan (US$30 million).

JNCCB has about 23 billion yuan (US$2.8 billion) in total assets, while the CBA has total assets of 305 billion Australian dollars (US$213 billion) and shareholders' equity of 24.9 billion Australian dollars (US$17.4 billion).

The co-operation with CBA will help JNCCB improve its risk resistance capacity, accelerate its integration with international best practices and lift its management levels, a JNCCB spokesperson said yesterday.

CBA's purchase of the 11 per cent stake will raise JNCCB's capital adequacy ratio by 1 percentage point to a healthy 10.26 per cent.

Though relatively healthier than the State-owned banks, China's city commercial banks are also hampered by high bad loan ratios and low capital adequacy, largely due to their blind business expansion in earlier years and administrative interference by the government.

The 112 banks had an average capital adequacy ratio of 6.13 per cent at the end of last year, below the 8 per cent minimum requirement.

Under the agreement, CBA will also transfer seven banking techniques to JNCCB in key areas such as information technology, credit card, risk management and marketing, the Chinese bank said.

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