Small and medium-sized bank equity auctions continue to face a cold reception

Our reporter Peng Yan

Recently, a journalist from Securities Daily reviewed information from Alibaba’s judicial auction platform and found that since the beginning of the year, the equity auction market for small and medium-sized banks has continued to cool down. “Unsold” and “discounted” sales have become common phenomena. Even when the shares of city commercial banks and rural commercial banks are heavily discounted, there are still no buyers.

From the auction results, many targets start bidding at 80% or 50% of their appraised value but still face multiple unsold instances; some targets are sold, but often at the starting bid or at a discount, resulting in a low overall success rate. The auctioned assets mainly include non-listed small and medium-sized banks and rural commercial banks, with individual shareholdings ranging from a few hundred thousand to hundreds of millions of shares.

For example, information from Alibaba’s judicial auction platform shows that on February 26, 595,420 shares of Henan Rural Commercial Bank were publicly bid. The appraised value of this equity was 1,030,100 yuan, with a starting bid of 659,264 yuan, which is a 64% discount from the appraised value. By February 27, with no bids, the auction was unsuccessful. This was the second auction for this equity.

Even targets that are successfully sold often do so at significant discounts. For instance, on February 27, 10,250 shares of Guangdong Xinfeng Rural Commercial Bank were auctioned, with the final price at 21,106.8 yuan, below the appraised value of 22,550 yuan.

Tian Lihui, a professor of finance at Nankai University, told Securities Daily that from an external perspective, the reform and risk mitigation work of rural credit cooperatives and small and medium-sized banks are underway, and investors are mostly cautious. Internally, many small and medium-sized banks have weak profitability and dividend-paying ability, limited potential for share appreciation, and some banks face asset quality and governance issues. Additionally, poor liquidity of shares and narrow exit channels raise concerns among investors.

Tian Lihui believes that the impact of the unsold and discounted bank equities should be viewed dialectically: small-scale unsold shares do not significantly affect bank operations, but large-scale holdings (especially those involving control rights changes) may trigger governance uncertainties, affecting strategic continuity, capital replenishment, and bank reputation. At the same time, this provides a window for banks to optimize their equity structures; introducing high-quality strategic shareholders can improve governance and competitiveness.

Wang Pengbo, senior analyst at Broadcom Consulting in the financial industry, told Securities Daily that frequent unsold and discounted shares directly weaken banks’ capital replenishment ability, exacerbate share dispersal issues, reduce governance efficiency, and may also impact external investors’ confidence in banks.

Tian Lihui believes that the key to solving this dilemma lies in reshaping the value of equity investments through risk clearing and governance restructuring: first, breaking information asymmetry by disclosing bad asset disposal and related-party transaction information to rebuild market trust; second, maintaining a focus on supporting agriculture and small businesses, pursuing differentiated operations, and strengthening financial services based on local needs; third, advancing digital transformation to improve customer management efficiency and perfecting the digital financial ecosystem.

Wang Pengbo stated that to enhance the attractiveness of small and medium-sized bank equities, efforts should be made to stabilize operations and dividend levels, improve asset quality and profitability, optimize shareholding structures, eliminate inefficient shareholders, introduce high-quality strategic investors, improve governance and internal controls, and strengthen information disclosure to reduce investment uncertainties.

(Edited by Qian Xiaorui)

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