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After planning to apply to terminate its listing on the New Third Board, the rural commercial bank announced that its shares would be suspended. On August 15, after applying to the National Equities Exchange and Quotations, Xingnong Bank's shares were officially suspended.

Before Xingnong Bank, banks such as Qiongzhong Rural Credit Cooperatives, Kashi Bank, and Hakka Bank have bid farewell to the New Third Board. The New Third Board once became a gathering place for small and medium-sized banks to enter the capital market. Since 2014, nine banks have been listed. However, since Xingnong Bank was listed in 2018, no bank has landed on the New Third Board. On the contrary, the number of institutions that have withdrawn due to transfer or participation in the reform of rural credit cooperatives has continued to increase.

In the view of analysts, the financing function of the New Third Board market is weak and liquidity is insufficient. The current business of small and medium-sized banks is different from the overall positioning of listed companies on the New Third Board, making it difficult to realize demands such as additional capital. It is not ruled out that some banks may gradually withdraw in the future.

Xingnong Bank's shares officially suspended

On August 14, Xingnong Bank issued an announcement announcing that after applying to the National Equities Exchange and Quotation Company, the bank's shares will be suspended from trading from August 15.

Prior to this, Xingnong Bank had planned to withdraw from the New Third Board. On July 9, Xingnong Bank held the 29th meeting of the third board of directors and reviewed and approved the proposal on reviewing the application for the company's shares to be delisted from the National Equities Exchange and Quotations and other proposals.

Regarding the reason for applying to terminate the listing, Xingnong Bank revealed that it was mainly to further deepen the reform of rural credit cooperatives. Combined with the company's own strategic planning and business development needs, after careful consideration, it plans to apply to the National Small and Medium Enterprise Equity Transfer System to terminate the listing of the company's shares.

Regarding the subsequent plans for deepening the reform of rural credit cooperatives, on August 15, a relevant person in charge of Xingnong Bank said in an interview with a Beijing Business Daily reporter, "Our bank will proceed in accordance with the relevant requirements of the state and the province, but there is no specific plan at present."

"There are many reasons why some small and medium-sized banks listed on the New Third Board choose to delist," said Zhou Maohua, an analyst from the Financial Markets Department of China Everbright Bank. On the one hand, the liquidity of the New Third Board market is weak and the market size is limited, which makes the financing effect less than ideal for banks. On the other hand, the New Third Board has strict regulatory requirements for listed small and medium-sized banks, and there is a certain misalignment between the market development positioning and the attributes of the banking industry. In addition, some banks have deepened reforms and returned to their roots and focused on their core business. Compared with scale expansion, they pay more attention to improving service quality.

It is understood that Xingnong Bank was established through multiple mergers and restructuring of rural credit cooperatives in the suburbs of Xingtai City, and was listed and opened in December 2012. In September 2018, Xingnong Bank was approved by the National Equities Exchange and Quotations for listing and trading, becoming the first rural small and medium-sized financial institution in Hebei Province to enter the capital market.

Since its listing in 2018, Xingnong Bank's performance has fluctuated greatly. In 2020, it fell into a situation of "increased revenue but not increased profits", and its net profit attributable to shareholders of the parent company once dropped from 264 million yuan in 2019 to 143 million yuan in 2020; in 2021 and 2022, it experienced "increased profits but not increased revenue" for two consecutive years; until 2023, the bank delivered a "sheet of double growth" in operating income and net profit attributable to shareholders of the parent company. During the reporting period, the bank achieved operating income of 791 million yuan, a year-on-year increase of 16.14%, and achieved net profit attributable to shareholders of 218 million yuan, a year-on-year increase of 15.53%.

Regarding the development strategy after the termination of listing, Xingnong Bank stated that the bank will further promote transformation and upgrading, coordinate various tasks such as maintaining positioning, improving services, promoting transformation, preventing risks, improving internal control, developing talents, and strengthening party building, and strive to build a modern financial enterprise with prominent main business, sound governance, and regional first-class.

Talking about the subsequent transformation and upgrading plan of banking business, the relevant person in charge of Xingnong Bank pointed out that on the one hand, the bank will reduce costs and increase efficiency, optimize the deposit structure, control liability costs, and actively guide customers to convert three-year and five-year time deposits to one-year and two-year deposits, and gradually reduce the interest expenses of time deposits. At the same time, it will increase the marketing of low-cost deposits such as demand deposits and corporate deposits; on the other hand, it will optimize the credit structure, improve the quality and efficiency of financial services for the real economy, focus on marketing high-quality small and micro enterprises, actively launch supply chain loan products such as orders, warehouse receipts, and accounts receivable, expand personal consumption loan business mainly for urban and rural residents, enterprises and institutions, and at the same time improve technology finance and green finance business.

The reason for the withdrawal is mainly due to the deepening of the reform of rural credit cooperatives.

The New Third Board was once an important gathering place for small and medium-sized banks to enter the capital market. Since 2014, nine small and medium-sized banks, including Qiongzhong Rural Credit Bank, Qilu Bank, Lucheng Bank, Hakka Bank, National Bank, Kashgar Bank, Rugao Bank, Huitong Bank and Xingnong Bank, have been listed on the New Third Board.

Zhou Maohua believes that the previous listing of small and medium-sized banks on the New Third Board was mainly to broaden financing channels, improve internal governance through listing, and promote steady improvement in operating levels. At the same time, listing will also help improve financing capabilities and to a certain extent help to exert brand effects.

However, since Xingnong Bank was listed in 2018, no other bank has been listed on the New Third Board, and the number of institutions withdrawing has increased. In 2018, Qilu Bank announced its transfer to the A-share market, and in March 2021, the bank was officially delisted from the New Third Board. Since then, Qiongzhong Rural Credit Cooperative, Kashgar Bank, and Hakka Bank have also withdrawn from the New Third Board.

As for the reasons for applying for delisting, many banks said that it was mainly to deepen the reform of rural credit cooperatives. For example, in May 2023, Qiongzhong Rural Credit Cooperatives stated that in order to cooperate with Hainan Rural Credit Cooperatives in deepening reforms and promote the establishment of Hainan Rural Commercial Bank, the bank needs to delist from the National Equities Exchange and Quotations. In November 2023, Kashgar Bank also announced that due to the deepening of the reform of rural credit cooperatives in Xinjiang and to promote the reform of the unified legal person of agricultural cooperatives in Kashgar region based on prefectures and states, it applied to terminate its listing on the National Equities Exchange and Quotations.

Zhou Maohua said that there are only a few small and medium-sized banks on the New Third Board. On the one hand, the operations of small and medium-sized banks have been affected in recent years and are in a stage of deepening reform. The market valuations are relatively low and the number of listings is relatively small. On the other hand, there are differences between the current business of small and medium-sized banks and the overall positioning of listed companies on the New Third Board.

More banks may withdraw

With the subsequent withdrawal of Xingnong Bank, there are only four banks left on the New Third Board, namely, National Bank, Huitong Bank, Lucheng Bank and Rugao Bank. Lucheng Bank was also facing the risk of being demoted from the innovation layer to the basic layer because its stock closing price had been lower than the par value per share for several consecutive trading days.

In terms of performance, Lucheng Bank achieved operating income of 252 million yuan and net profit attributable to the parent company of 68 million yuan in 2023, up 2.18% and 4.43% year-on-year respectively. National Bank and Huitong Bank respectively presented the situation of "increased revenue but not increased profit" and "increased profit but not increased revenue". During the reporting period, National Bank achieved operating income of 121 million yuan, up 3.84% year-on-year, while net profit attributable to the parent company decreased by 8.05% year-on-year to 28 million yuan; Huitong Bank's operating income decreased by 0.87% year-on-year to 1.257 billion yuan, and net profit attributable to the parent company increased by 4.04% year-on-year to 596 million yuan. Although Rugao Bank has an absolute advantage in the scale of operating income and net profit attributable to the parent company, it suffered a decline in the growth rate of operating income and net profit attributable to the parent company in 2023. In 2023, the bank achieved operating income of 1.518 billion yuan and net profit attributable to the parent company of 397 million yuan, down 0.03% and 14.15% year-on-year respectively.

Dong Ximiao, chief researcher of CCB, said that the financing function of the NEEQ market is weak and the liquidity is insufficient. For banks, it is difficult to achieve the demand of supplementing capital by listing on the NEEQ at this stage. On the contrary, listing on the NEEQ also generates relevant expenses every year. In addition, listing on the NEEQ is not beneficial to the bank's own brand image. It is expected that other banks will also be delisted from the NEEQ in the future.

How should small and medium-sized banks replenish capital after delisting from the New Third Board? Dong Ximiao suggested that public listing on the main board market is an important way for small and medium-sized banks to supplement capital and enhance capital strength. Through public listing, small and medium-sized banks can further strengthen external constraints, standardize business management, enhance brand image, and better achieve high-quality development. Financial management departments should attach importance to the role of small and medium-sized banks, not judge heroes by size, and vigorously support more high-quality small and medium-sized banks to be listed first. Small and medium-sized banks themselves should take the initiative to abandon the "scale complex" and "speed complex", formulate a scientific and reasonable development strategy, and take localization, specialization, refinement, and specialization as the direction and action requirements, and strive to become "small and beautiful" and "small and fine" high-quality and innovative banks.

Beijing Business Daily reporter Li Haiyan