26 September 2018

Xinyi Glass joins private bank rush

Following the Communist Party’s recent policy meeting, investors expect financial reforms to gather pace in China. One of the main initiatives is believed to be facilitating the establishment of new private banks. A week after the party plenum, glass products manufacturer Xinyi Glass Holdings (00868.HK) has announced that it received an invitation recently from the municipal government of Wuhu to participate in launching a new commercial bank. It said it will consider teaming up with other Wuhu enterprises to set up an entity named Dajiang Bank {大江銀行}.

Observers believe there will be another wave of private bank applications, but the market excitement over the issue has been cooling of late, judging by the share price reaction. Xinyi Glass shares closed just 3 percent higher on Thursday after its announcement. In contrast, Suning Commerce Group (002024.CN) had shot up 8 percent on Aug. 21 when the news of its banking foray was out.

Xinyi Glass said the registered capital of its proposed bank will be 1 billion yuan (US$164 million). The group will invest 200 million yuan and become the largest shareholder. Seven other partners, including Anhui Xinke New Materials (600255.CN) and Anhui Jingcheng Copper Share Co. (002171.CN), will invest 100 million each.

The National Business Daily cited sources close to the deal as saying that the parties intend to diversify from their core businesses and invest in the banking industry as it could offer higher returns.

Individual investors include Olympic tennis gold medal winner Yan Zi {晏紫}, who is the wife of Xinyi Glass’ executive director Li Shenggen. She is reportedly investing 20 million yuan in the new private bank, and will become one of the top ten shareholders.

Such private bank mania is far from risk-free. Firstly, the relaxation of private banks’ entry threshold is still in the initial stage. No concrete details on regulations and policies have come out yet, which makes the situation rife with unknowns and uncertainties.

Even if the rules are clearly laid down, there is another problem as none of the announced Dajiang Bank shareholders has any experience in running a bank, as has been the case with other bank applicants.

That said, municipal governments and enterprises are not bothering to look back as would love to gain a foothold in the industry as soon as possible. Since the State Council hinted in July that the entry threshold for setting up private banks will be relaxed, authorities have approved 36 name registrations for private banks so far, as the Securities Times noted.

– Contact the writer at [email protected]


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