There has been no progress in IPO acceptance in nearly a year, and Hubei Bank plans to issue 1.8 billion new shares to ease capital adequacy pressure

Blue Whale News, March 4 (Reporter Jin Lei)Recently, Hubei Bank disclosed that it has formulated a new round of capital increase and share expansion plan in the third quarter of 2024. It plans to issue no more than 1.8 billion new shares to investors who meet regulatory requirements, and complete all legal procedures by the end of June this year. At present, the bank’s capital increase and share expansion plan has been approved by the Hubei Bureau of the State Financial Supervision Administration and is being registered and reviewed by the China Securities Regulatory Commission. During this period, the bank conducted extensive negotiations with investors and has initially determined its share subscription intention.

According to the 2023 annual report, as of the end of 2023, the total share capital of Hubei Bank is approximately 7.612 billion shares, the largest shareholder Hubei Hongtai Group Co., Ltd. holds 1.522 billion shares, the second largest shareholder Hubei Communications Investment Group Co., Ltd. holds 1.343 billion shares, and the third largest shareholder Changjiang Industrial Investment Group Co., Ltd. holds 609 million shares.

If all 1.8 billion shares are issued this time, the bank’s total share capital will increase to 9.4 billion shares, and the equity ratio of the newly added portion will be close to 19%.

Data shows that as of the end of September 2024, the bank’s core tier 1 capital adequacy ratio, tier 1 capital adequacy ratio and capital adequacy ratio were 8.03%, 9.82% and 12.15%, respectively, which were 0.68, 0.05 and 0.2 percentage points lower than the end of 2023, and are getting closer and closer to the red line of supervision.

Looking back on the bank’s capital adequacy ratio in recent years, it is not optimistic. Judging from the capital adequacy ratio alone, the bank fell from 13.89% at the end of 2021 to 12.15% in the third quarter of 2024, and the core tier 1 capital adequacy ratio fell from 10.61% to 8.03%.

Bank of Hubei said that due to the impact of new credit and the rapid growth of other assets, our bank’s capital adequacy ratio has declined. This capital increase and share expansion is expected to be completed before the end of June, and the core tier-1 capital adequacy ratio will increase by 2. About percentage points, and new assets are mainly invested in inclusive finance and retail finance to reduce capital consumption and improve profitability.

In fact, small and medium-sized banks are currently generally facing the dilemma of relatively low capital adequacy levels, so there is an urgent need to replenish capital. IPO listing is one of the important channels for such banks to raise capital.

As early as 2015, the bank clearly put IPOs on the agenda. In its annual report that year, it pointed out that it would start the H-share IPO first, and then choose an opportunity to return to A-shares after the A-share IPO application path was smooth.

In November 2022, Hubei Bank submitted a listing application for the first time, and switched to registration-based track review in 2023. On March 3, 2023, the Shanghai Stock Exchange accepted the listing application of Hubei Bank.

However, after more than a year, Hubei Bank’s IPO application is still at the acceptance stage and there is no further progress. In fact, IPOs of bank stocks have been sluggish in recent years. Against this background, capital increase and share expansion has become an important way for small and medium-sized banks to increase their capital adequacy ratios to relieve capital pressure.

The official website of Hubei Bank shows that the establishment of the bank can be traced back to the Bank of Hubei Province, which was established in 1928. At the beginning of 2010, the Hubei Provincial Party Committee and the Provincial Government decided to establish Hubei Bank through new mergers based on the original five city commercial banks: Yichang, Xiangyang, Jingzhou, Huangshi and Xiaogan. With the approval of the former China Banking Regulatory Commission, Hubei Bank was officially established on February 27, 2011, with its headquarters in Wuhan. At present, there are 247 business outlets in the province, achieving full coverage of outlets in all cities, prefectures and counties in the province, with more than 5800 employees.