China Construction Bank sells 27 rural lenders to BOC

The village banks failed to generate significant contribution to their parent bank's bottomline.

China Construction Bank (CCB) has sold 27 rural banks from its portfolio to Bank of China (BOC) in a move that makes BOC the biggest owner of the country’s village banks, reports Caixin. 

CCB has invested $1.4b in the rural banks as part of the government’s financial inclusion blueprint.

However, the bank’s contribution to CCB’s profit margins remained minimal after the total net profit of the 27 rural lenders hit $41.21m (CNY281m) in end-2017 or just a 10th of a percent of the parent bank’s total net profit of $35.73b (CNY243.6b).

On its part, BOC has earlier set up a joint venture with Fullerton Financial Holdings in 2011 to establish a network of rural banks across China. As of end-2017, BOC Fullerton had 97 rural banks.

“Bank of China doesn’t expect the rural banks to provide an immediate return,” BOC Fullerton Chairman Wang Xiaoming told local media. He said he expected the acquisition to hurt the parent bank’s financial results, but “the parent is big enough to absorb.”