China’s third attempt in two months to auction off the shares of a Zhejiang-based rural bank on e-commerce platform Taobao resulted in precisely zero bids in yet another example illustrating the health of the nation’s banking system.
After Chinese authorities broke a more than 20-year streak by seizing Inner Mongolia-based Baoshang Bank in May this year, there have been more than 1,400 attempted share sales on Taobao from mostly unlisted rural and city banks, many of which have applied deep discounts. Transaction records showed that over half of the auctions failed to attract bidders on their first attempt.
«Most banking licenses are no longer valuable,» said Zhang Shuaishuai, a Shanghai-based analyst at China International Capital Corporation (CICC) in an «SCMP» report.
«With the ongoing deleveraging campaign, fiercer competition and tougher regulatory oversight, some smaller banks are fighting a battle for survival. Investors have no confidence in the healthiness and transparency of their balance sheets.»
2.4 Trillion Yuan Gap
By one UBS estimate, smaller banks in China are facing a capital shortfall potentially totaling 2.4 trillion yuan ($340 billion) which they are struggling to raise through stock and bond issuances. The Swiss major believes the size of the distressed asset universe in China could total 9.2 trillion ($1.3 trillion).
Meanwhile, Chinese regulators continue to unveil concerning if not surprising practice at smaller banks including loan issuance to unqualified borrowers, veiled non-performing debt and the acceptance of forged signatures.
