China's Bank of Gansu, hit by depositor nerves, moves to provide loans to state firms

Bank of Gansu

10/04/2020 08:55

BEIJING, April 10 (Reuters) - China's Bank of Gansu
 2139.HK  has agreed to provide 30 billion yuan ($4.26 billion)
of loans to state firms in the northwestern province over the
next three years, in an apparent show of financial strength
after a rush of fund withdrawals at one of its branches last
week.
    The Hong Kong-listed bank signed an agreement on Thursday
with the Gansu branch of the State-owned Assets Supervision and
Administration Commission and nine companies owned by the
provincial government with pledges of the loans to the firms,
according to Guansu Economic Daily, a newspaper run by the
provincial government, on Friday. 
    The collaboration between the bank and the state-owned firms
will "effectively support steady and healthy economic and social
development in the province," according to a statement on the
provincial government website.
    Bank of Gansu didn't immediately respond to a Reuters
request for comment.
    It wasn't clear if the agreement could lead to any capital
injection from the local government to Bank of Gansu, which had
total assets of 335 billion yuan as of end of last year. The
bank, controlled by Gansu provincial government, counts the
state-owned Gansu Provincial Highway Aviation Tourism Investment
Group as its biggest shareholder. 
    The move comes as investors and depositors grew anxious 
about the bank's performance after its 2019 net profits slumped 
85% year-on-year. The bad-loan ratio picked up by 16 basic
points to 2.45% last year from the end of 2018. 
    Shares of the bank have plunged nearly 30% in Hong Kong
trading since the start of April.
    A branch of the bank in Hui, a county in Gansu with a
population of more than 220,000 people, received a high volume
of over-the-counter requests from depositors to withdraw cash on
Sunday. 
    The local government and regulators later issued a joint
statement on Monday saying Bank of Gansu had sufficient assets,
and its operations and management were in good standing.
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    Local governments have been playing an active role over the
last year to rescue several troubled banks as Beijing looks to
shore up some of the country’s weakest lenders amid slowing 
economic growth. 
    The governments of Inner Mongolia Autonomous Region and
Baotou, a major city in the region, will lead the acquisition of
at least a 50% stake in a reorganized Baoshang Bank, Reuters
reported in January.
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($1 = 0.1415 Chinese yuan renminbi)

 (Reporting by Zhang Yan, Cheng Leng, and Ryan Woo in Beijing;
Editing by Kim Coghill & Shri Navaratnam)
 ((Zoey.Zhang@thomsonreuters.com;))