Constantly Moving! This Year's Three "Village Reform" Plans

Constantly Bank has once again launched a "village reform" plan.

Recently, Constantly Bank (601128) released meeting materials for the shareholders' meeting, proposing to absorb and merge three village banks and set up branch institutions. This proposal still needs to be passed by the shareholders' meeting on August 11th.

This is Constantly Bank's third "village reform" plan this year. In June, the bank had already opened three branches, all of which were transformed from absorbed and merged village banks. The bank's first batch of "village reforms" was implemented earlier this year.

Worth noting is that Constantly Bank has a domestic investment management company under its umbrella, known as Xingfu Village Town Bank, which can operate nationwide and acquire other village banks, expanding its business space. Why does the parent bank participate in all these "village reforms"?

2024 has seen rapid progress in rural reform, with many mainstay banks absorbing and merging their village town banks to establish branch institutions.

Constantly Bank's "village reform" actions have been tightly linked to its actions at the end of last year. The bank completed its "village reform" for Jiangsu Tianfu Village Town Bank, transforming it into two branches - Tianfu Branch and Yangtze River Branch.

Why does the parent bank directly absorb and merge village banks?

Constantly Bank is a major player in setting up village town banks.

The bank's investment management company, Xingfu Village Town Bank, is the first national-level investment management-type village town bank, with its subsidiaries located in Hubei Province, Jiangsu Province, Henan Province, and Yunnan Province. This company has a nationwide license to acquire and merge other village banks.

Since it has this nationwide license, why doesn't the parent bank participate in acquiring and merging outside village town banks?

It's because of the difficulty in integrating and transforming these "outside" village town banks, as well as the challenges posed by their management and operations.

The bank believes that this direct absorption and merger approach has significant advantages over building new branch institutions. The acquired village banks already have a customer base, business network, and operational experience in the local area.

The bank's management team is more mature and has stronger risk control capabilities, as well as more abundant capital resources to effectively manage the risks associated with expanding its business.

Looking ahead, the new branches will further open up the bank's development map in Jiangsu Province.

Rural reform is an important part of financial institution reforms.

As early as December 2020, the original Banking and Insurance Regulatory Commission released a notice on further promoting rural bank reforms, proposing to support mainstay banks in supplementing capital for village town banks and gradually pushing forward with the merger and reorganization of these banks.

In 2024, the pace of rural bank mergers has accelerated, with more and more village town banks being absorbed and merged by mainstay banks to establish branch institutions. Currently, there are over a thousand rural banks in China.

From the case studies, we can see that the reorganization methods for rural banks mainly include absorption and merger, acquisition, and establishment of branch institutions or divisions. Among these, absorption and merger is more common.

Many mainstay banks have set up series of village town banks under their umbrella, which are often branded with the same name as the parent bank, such as Xingfu Village Town Bank, Minsheng Bank's Minsheng Village Town Bank, and Beijing Bank's Beijing Village Town Bank.

In June, Industrial and Commercial Bank of China (ICBC) was approved to acquire its wholly-owned subsidiary, Chongqing Baishan ICBC Village Town Bank, and transform it into a branch institution. This is the first case of a major state-owned bank's "village reform"."