China’s Zhongyuan Bank to merge with 3 local lenders in sector consolidation

2 mins read

BEIJING – China’s Zhongyuan Bank Co, a city lender in the central province of Henan, said it plans to merge with three other local banks amid calls from Beijing for small banks to consolidate to contain risks in the regional banking system.

Zhongyuan Bank, created in 2014 with the merger of 13 smaller banks in Henan, will acquire Bank of Luoyang, Bank of Pingdingshan and Bank of Jiaozuo China Travel Services Co, according to the company’s filing with the Hong Kong exchange on Wednesday.

Bank of Luoyang was listed as one of 20 main banks for embattled property giant China Evergrande Group,according to the developer’s interim report released in September.

Bank of Luoyang has not elaborated on its loan exposure to Evergrande. At the end of 2020, 9.15% of its outstanding loans were lent to the property sector, according to its annual report.

After the completion of the potential merger, Zhongyuan Bank will continue to expand its business and “enhance the ability of financial services for the economic and social development of the province”, it said.

Zhongyuan did not elaborate how it will settle assets and liabilities of the three small banks, and cautioned the deal had yet to be finalised.

In September, China’s northeastern province of Liaoning set up Bank of Liaoshen, a new provincial level commercial bank formed by merging local banks, amid a deteriorating economy in the rustbelt province.

The local economy in Henan was disrupted by COVID-19 pandemic, and heavy flooding in July killed more than 300 people, heightening the pressure on the local banking system.

Zhongyuan Bank and Bank of Luoyang didn’t immediately respond to queries sent by Reuters.

(Reporting by Cheng Leng, Zhang Yan and Ryan Woo; Editing by Lincoln Feast.)