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

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BEIJING, April 10 (Reuters) – China’s Bank of Gansu 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.

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.

$1 = 0.1415 Chinese yuan renminbi
Reporting by Zhang Yan, Cheng Leng, and Ryan Woo in Beijing;
Editing by Kim Coghill & Shri Navaratnam

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