The Postal Savings Bank of China Co Ltd, a commercial bank in China serving small business owners, said on Monday that it has finished a joint-stock restructuring and paved the way for a sale of shares to the public.
The bank, which has the reputation of being the "Chinese Wells Fargo", is a subsidiary of the State-owned China Post Group Corp, the country's biggest postal company.
China Post Group Corp is already trying to raise capital for another of its subsidiaries. The delivery company China Postal Express & Logistics Co Ltd recently filed for a listing with the China Securities Regulatory Commission and passed the commission's first round of examinations. It is likely to float its shares soon.
Analysts say completing the restructuring will bring Postal Savings Bank of China, the country's sixth largest lender measured by asset values, a step closer to listing its shares on the stock market. That, they said, makes it likely the company will file a listing application in the "foreseeable future".
Jin Lin, a banking industry analyst with the Shanghai-based Orient Securities Co Ltd, said it is completely possible the bank will go public, noting that China Development Bank, another State-owned institution, has talked about floating shares.
The Postal Savings Bank of China, once restructured, will take over all of its former self's assets, liabilities and personnel and will not trouble depositors by requiring them to follow new procedures, the bank said in a statement posted on its official website. The new entity has 45 billion yuan ($7.1 billion) in registered capital.
The restructuring is coming after the bank saw its loans increase and its capital adequacy ratio - the ratio of the bank's capital to its weighted risks - drop below the minimum level mandated by regulators.
The bank's capital adequacy ratio stood at 8.37 percent at the end of 2010, about 2 percentage points lower than the requirement of 10.5 percent. The Postal Savings Bank hasn't published its ratio for 2011 yet.
In June 2011, the bank announced plans to hold its first auction of subordinate bonds, planning to sell up to 16 billion yuan in bonds in an attempt at replenishing its capital.
The bank is required to have a fairly high capital adequacy ratio because it conducts most of its business in rural areas, where risks are often fairly high. The bank's loan balance to small businesses reached 749.3 billion yuan by the end of October 2011.
"Floating shares is the best way for the Postal Savings Bank of China to replenish its capital," said Guo Tianyong, head of the banking industry research center at the Central University of Finance and Economics in Beijing.
China National Radio reported that many investors, including JP Morgan Chase & Co, have spoken to the bank about making investments.
The Postal Savings Bank's low loan-to-deposit ratio gives it great potential to expand. The China Banking Regulatory Commission requires lenders to maintain a loan-to-deposit ratio - the amount of outstanding loans a bank has compared with its deposits - of less than 75 percent.
While many lenders have been struggling to meet the requirement, the Postal Savings Bank has a ratio of about 20 percent, meaning it has a large amount of leeway to make new loans.
The bank has about 3 trillion yuan in deposits but is only allowed to make small loans, mostly to support rural development. "The bank has a great deal of potential since it has a lot of money to be loaned out," said Jin Lin, the Shanghai-based analyst.