BEIJING (Reuters) - China's Bank of Gansu 2139.HK has agreed to loan 30 billion yuan ($4.26 billion) to state firms over the next three years, after the Gansu provincial government reportedly agreed to provide a capital injection following a spate of withdrawals at one branch last week.
The Hong Kong-listed bank, which is controlled by the provincial government, pledge the loans in an agreement signed on Thursday with the Gansu branch of the State-owned Assets Supervision and Administration Commission and nine companies owned by the provincial government, the Guansu Economic Daily, a newspaper also run by the provincial government, reported 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.
The bank, which had total assets of 335 billion yuan as of end of last year, counts the state-owned Gansu Provincial Highway Aviation Tourism Investment Group as its biggest shareholder.
The Gansu government approved a plan on Tuesday to inject capital into the bank with support from the central bank’s special loans, financial news outlet Caixin reported on Friday, citing unidentified regulatory sources. Caixin didn’t specify the size of the capital injection.
People’s Bank of China officials declined to respond to questions about Bank of Gansu at an unrelated news conference on Friday.
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.
Since the start of April, the bank’s shares have plunged nearly 30% in Hong Kong trading.
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.
Reporting by Zhang Yan, Cheng Leng, and Ryan Woo in Beijing; Editing by Kim Coghill, Shri Navaratnam & Simon Cameron-Moore
Our Standards: The Thomson Reuters Trust Principles.