(Yicai Global) July 17 -- Bank of Hangzhou will plan how to stabilize its stock price which has been falling below its audited book value for 20 consecutive trading days this year despite growth in earnings and an inclusion into the MSCI Emerging Markets index.
Bank of Hangzhou will convene a meeting of its board of directors before July 26, and draw up, as well as publish detailed plans to stabilize its stock price, the eastern Chinese lender said in a statement yesterday.
From June 19 to July 16, the closing price of the bank's securities assets has fallen below the book value of equity per share, prompting it to take action to reduce the volatility. The stocks hit the lowest for six months at CNY7.31 (USD1.09) on July 5 but have rejuvenated since to trade at CNY7.7 at 11.55 a.m. Beijing time.
MSCI added the lender's stock to the MSCI Emerging Markets index in February as part of the US index compiler's move to gradually include more A-market shares to its gauges for global secondary markets' performance.
No one knows exactly why Bank of Hangzhou trades so poorly. The lender's earnings show an upswing and the MSCI inclusion should bring more passive funds into the coffers. One of the guesses is that investors have grown weary about the banking sector's lack of transparency, while suspecting a high level of hidden non-performing loans, and thereby aiming elsewhere with their investments.
The bank reported an operating income of CNY8 million (USD1.2 million) in the first six months of this year, up 26 percent from the same period last year. The net profit attributable to shareholders increased 19 percent to CNY3 million since last year. Non-performing loan ratio fell 0.03 percentage point to 1.6 percent.
Bank of Hangzhou's audited book value per share is CNY11.42, according to the lender's annual report for last year. On July 4, the BVPS was lowered 30 percent to CNY7.94 per share.
One of the measures to bring investor sentiments up will probably be buying back the shares, as the bank suggested in its previous stabilization plan.
Editor: Emmi Laine