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Yumin Bank will become the first private bank whose largest shareholder is state-owned.

Text/Daily Financial Report Zhang Heng

As an important financial force enriching my country's financial industry and stirring up the market economy, private banks established with the participation of private capital have always been the focus of industry attention for every step they take in the financial market.

We know that with the vigorous development of my country's private economy, the size of private capital is getting bigger and bigger, with the advantages of new system, active mechanism and many innovations, but it has long lacked effective investment channels. Under the national policy of encouraging private capital to set up private banks with their own risks, private capital has a formal investment channel, which helps to guide this force into the real economy and support the development of the real economy. At the same time, private capital can also rely on its own advantages to carry out financial innovation activities more flexibly through banking institutions and promote the diversified development of financial products and services.

But the development of anything is full of uncertainty. So, once state-owned assets become the largest shareholder, will private banks still be the same private banks?

Perhaps only Yumin Bank, which has now completed its nationalization, can provide some logical solution to this problem.

On the evening of August 12, the State Financial Supervision and Administration Bureau officially approved Nanchang Financial Holdings Co., Ltd. (hereinafter referred to as "Nanchang Financial Holdings") to acquire 600 million shares of Jiangxi Yumin Bank held by Zhengbang Group Co., Ltd. (hereinafter referred to as "Zhengbang Group") and become the new major shareholder of the bank. After the acquisition, Nanchang Financial Holdings holds a total of 600 million shares of Jiangxi Yumin Bank, accounting for 30% of the shares.

After this equity transfer, not only does it mean that the largest shareholder of Jiangxi Yumin Bank has undergone major changes, but it also sends a signal to the market that among the current 19 private banks, Yumin Bank will become the first private bank whose largest shareholder is state-owned assets.

It can be seen that the first appearance of state-owned capital as the largest shareholder of a private bank obviously has great practical and far-reaching significance for Yumin Bank, all private banks, and even the entire financial market economy.

In the ups and downs of historical financial development, Yumin Bank is a "golden signboard"

Yumin Bank is not only an "old brand", but also a "golden brand" in Jiangxi.

Looking back at history, in 1926, after the Northern Expedition Army pacified Jiangxi, in order to smoothly solve many financial problems such as market subsidiary currency and handling financial aftermath, it began to prepare for the establishment of Jiangxi Yumin Bank. Combined with the background of the times, Yumin, meaning "benefiting the country and the people", carries the authorities' expectations for the restoration and prosperity of Jiangxi's financial market.

After two years of preparation, Jiangxi Yumin Bank officially began operations in 1928 as an agent for the provincial treasury, becoming the largest and longest-operating bank in Jiangxi during the Republic of China period.

The wheel of history rolls forward, and the financial tide of the new era is sweeping in. Yumin Bank, this golden signboard will naturally not remain silent in the torrent of history, but was reborn in 2019. It was approved for preparation on May 20 of that year and officially opened on September 27. It is the 18th private bank in the country, with a market positioning of serving "private enterprises, private economy, and people's livelihood."

In fact, the Jiangxi Provincial Government "did its utmost and went all out" to obtain the private bank license. This was not only written into the provincial government's work report, but Mao Weiming, the provincial committee member and executive vice governor who was in charge of the matter, also visited the leaders of the China Banking and Insurance Regulatory Commission many times to communicate, coordinate and discuss the relevant work. All these actions are enough to show how much the Jiangxi financial market values ​​the Yumin Bank brand.

In terms of shareholders, the newly established Yumin Bank was jointly established by Zhengbang Group, Boneng Group and several private enterprises in Jiangxi Province, with a total of 9 shareholders. Among them, Zhengbang Group holds 30% of the shares and is the bank's largest shareholder; Boneng Group is the second largest shareholder, holding 29.5% of the shares; and the other 7 private enterprises hold a total of 40.5% of the shares.

It is worth mentioning that the bank’s two major shareholders were very strong and influential in the Jiangxi market at that time. The two companies ranked first and fifth respectively among the top 100 private enterprises in Jiangxi Province in 2018, and their advantages are evident.

As the largest shareholder, Zhengbang Group is a national key leading enterprise in agricultural industrialization and a nationally renowned pig farmer, known as the "Jiangxi Pig King". It has established four major industries including animal husbandry, plant food, food and financial holding, and owns a listed company, Zhengbang Technology.

The former "pig king" fell apart, and Yumin Bank fell into a performance dilemma

Objectively speaking, if we look at the equity structure at that time, Yumin Bank, backed by strong private capital in the local market, could have had a smooth life, achieved mutual success with its shareholders, and ushered in its highlight moments together.

In fact, this is indeed the case. At that time, Zhengbang Technology, a subsidiary of Zhengbang Group, became the most dazzling listed pig company. In 2020, its pig output reached 9.5597 million heads, making it the second largest pig farming giant in China after Muyuan, and its market value exceeded 80 billion yuan. At that time, Zhengbang made a huge profit of 5.7 billion yuan in one year, and its founder Lin Yinsun became the richest man in Jiangxi in 2020 with a net worth of 32 billion yuan.

In the second year after its establishment, Yumin Bank also ushered in an important turning point in its performance in 2021. Its operating income increased significantly to 420 million yuan that year, and its net profit turned from a loss in previous years to 62 million yuan, successfully entering a profit-making period.

However, the market changed suddenly, and the once-powerful "Jiangxi Pig King" chose a bold and risky path when he was full of ambition - debt expansion, but unexpectedly encountered a sharp drop in pig prices. In 2021, Zhengbang Technology suffered a huge loss of 18.8 billion yuan, ranking third on the A-share loss list. It was jokingly called by the industry as a typical negative case of radical expansion backfiring.

In such a cramped reality, Zhengbang Group also paid a heavy price for its rapid development. In October 2022, Zhengbang Group and Zhengbang Breeding were unable to repay their debts and were ordered by the court to enter bankruptcy reorganization procedures, which also meant that the "first private enterprise in Jiangxi" had entered the final chapter of bankruptcy.

In 2023, with the timely entry of 17 investors led by the "white knight" Twin Group, Zhengbang Technology received a total of 4.34 billion yuan in restructuring funds, and the restructuring was successfully completed at the end of the year. Thanks to this, Zhengbang Technology successfully escaped the delisting risk warning in June 2024, and the stock name was changed from "*ST Zhengbang" back to "Zhengbang Technology".

"When the nest is overturned, how can the eggs remain intact?" Judging from the financial report, Yumin Bank also fell into difficulties in 2022.

Financial report data shows that as of the end of 2022, the total assets of Yumin Bank were 17.673 billion yuan, an increase of only 1.65% year-on-year, ranking last among the 19 private banks in China.

Regarding the deposit and loan scale that has attracted much attention from the market, we know that since 2021, affected by multiple factors such as the tightening of Internet deposit and loan business, the growth rate of deposit and loan scale of private banks has tended to slow down in recent years, and "growth rate of over 100%" has long become history, and Yumin Bank is no exception.

In terms of loan scale, as of the end of 2022, the total amount of loans and advances issued by Yumin Bank was 9.913 billion yuan, a year-on-year decrease of 12.64% compared with 11.347 billion yuan in 2021.

It is reported that Yumin Bank's loan products are oriented to enterprises and individuals. The B-end customer loans mainly include "Shang Yu Loan", "Hui Yu Loan" and "Su Yu Loan", which mainly serve small and micro enterprises and individual industrial and commercial households to support their business development. For C-end customers, the bank has launched products such as "Jin Yu Loan", "Tong Yu Loan", "Nong Hu Loan" and "Shan Cha Hua Kai Loan", with the maximum loan amount ranging from 200,000 to 500,000 yuan.

Some analysts pointed out that the reason why Yumin Bank experienced a serious decline in loans is closely related to its relatively single product categories, lack of differentiated products designed for different customer groups, and difficulty in meeting the diversified needs of different customers. For example, many other private banks' online businesses have covered diversified products such as deposits, wealth management, loans, and insurance, and will also design and develop special deposit products for different groups such as high-net-worth customers, small and medium-sized enterprises or young people. In comparison, Yumin Bank still needs to improve its product categories and user experience.

Compared with the loan side, the deposit side of Yumin Bank is also not optimistic, and the downward trend is particularly obvious. At the end of 2022, the bank's total deposits were only 11.737 billion yuan, a year-on-year decrease of 8.4%. We know that private banks once attracted customers with deposit rates higher than those of traditional commercial banks, but in the context of continued downward interest rates today, the pressure on Yumin Bank to attract deposits may continue to increase.

Looking at the performance, from 2019 to 2022, Yumin Bank achieved operating income of RMB 22 million, RMB 187 million, RMB 420 million and RMB 542 million respectively; the net profit in the same period was RMB -92 million, RMB -82 million, RMB 62 million and RMB 50 million respectively.

It is not difficult to find that the bank only paused at the turning point of its performance in 2021, but fell into a situation of "increasing revenue but not increasing profits" in 2022. The Daily Financial Report analyzed that the reason why Yumin Bank's net profit was greatly reduced was related to its high operating expenses.

Financial report data shows that the bank's operating expenses reached 509 million yuan in 2022, a significant increase of 45.43% year-on-year, which is close to the revenue of that year. Among them, business and management expenses and credit impairment losses, which account for the majority, increased significantly, reaching 210 million yuan and 242 million yuan respectively, an increase of 5.53% and 154.74% year-on-year respectively.

At the same time, with the decline in performance, the asset quality pressure of Yumin Bank has also increased. As of the end of 2022, the bank's non-performing loan ratio increased from 0.54% at the end of the previous year to 1.24%, an increase of 0.7 percentage points; the provision coverage ratio dropped sharply from 542.95% at the end of the previous year to 331.64%, a decrease of 211.31 percentage points, which also means that the bank has less provisions for potential non-performing loan losses, and its risk control capabilities are facing challenges.

Perhaps due to poor operating conditions, rapid increase in non-performing loan ratio, or the lack of agreement on relevant financial indicators with the accounting firm, Yumin Bank has not disclosed its 2023 annual report to the outside world since the announcement of the 2022 annual report. The bank is also the only one among the 19 private banks that has not disclosed its 2023 operating performance data.

However, according to an announcement released by Zhengbang Technology, as of the end of September 2023, Jiangxi Yumin Bank achieved operating income of 254 million yuan in the first three quarters of 2023, but was in a loss-making state, with a net profit of -242 million yuan. Compared with previous performance, it is not difficult to see that the loss value has reached the highest in history. It is conceivable how great the pressure is for Jiangxi Yumin Bank to turn losses into profits.

We are delighted to welcome the entry of major state-owned shareholders. What will happen next?

After reviewing the ups and downs of the development history of Jiangxi Yumin Bank, we will focus on the state-owned capital takeover party, Nanchang Financial Holdings.

Public information shows that Nanchang Jinkong was established in 2018 and is 100% controlled by Nanchang Industrial Investment. It has a registered capital of 4 billion yuan. It has 10 subsidiaries including secured financial leasing, supply chain finance, asset management, private financing registration, loan transfer, and factoring, covering three functional sectors: industrial investment, financing services, and asset management.

Further penetration of equity shows that Nanchang Industrial Investment is held by Nanchang Municipal People's Government with 91.037% and Jiangxi Provincial Administrative and Public Assets Group Co., Ltd. with 8.963% respectively. It can be seen that the actual controller is Nanchang Municipal People's Government, with a principal rating of AA+. It is a state-owned capital operation entity at the Nanchang municipal level with industrial investment as its main business, and is mainly responsible for the restructuring of municipal industrial state-owned enterprises and industrial investment.

According to Nanchang's industrial investment business planning path, in terms of industrial finance, a "1+7" industrial financial service system has been established with Nanchang Financial Holding as a professional management platform, covering relatively complete functions such as guarantees, supply chain finance, and factoring to support the healthy development of Nanchang's real economy.

From the perspective of financial market economy, the intervention of the state-owned major shareholder is undoubtedly a key "assistance" in the predicament of Jiangxi Yumin Bank. The reason why private banks are named "private" lies in the private attributes of their major shareholders. The current entry of state-owned assets not only breaks the original "private" boundary, but also marks that the intervention of the state-owned major shareholder will be an important turning point in the development of the private banking industry. The intervention of state-owned assets has far-reaching influence and transformative significance on the current status of the industry.

Zeng Gang, director of the Shanghai Finance and Development Laboratory, said: "The adjustment of shareholders by Yumin Bank is a normal market behavior. The current market competition is becoming increasingly fierce. Compared with large banks with capital cost advantages, some private banks are facing more and more obvious bottlenecks in their development. In the context of the central government's risk prevention, some institutions optimize their equity structure mainly to enhance their sustainable development capabilities. Introducing more powerful shareholders is a normal market choice."

As a key chapter in China's financial reform process, private banks have achieved remarkable development achievements in the past decade, fully playing the role of "supplementary force" in the financial system and "vitality invigorator" in the banking industry. They have not only won wide recognition in China, but also gained certain praise on the international stage.

So, with the first state-owned capital entering the market, how will Jiangxi Yumin Bank develop in the future? And as a private bank with a special banking license, will there be new changes in the future after experiencing this sample case? Daily Financial Report will continue to pay attention.

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