(Yicai) April 24 -- Yillion Bank, backed by Chinese on-demand services giant Meituan, is set to follow other private Chinese lenders in bringing in a state investor as private banks work to reduce shareholder risk and improve governance.

Jilin Financial Holding Group, a state-owned investor under the Jilin provincial government, will become Yillion Bank’s largest shareholder, with the process already underway, an informed source told Yicai. Meituan will remain the Jilin-based lender’s second-largest shareholder.

Following the investment, the bank is likely to work with its new controlling shareholder on a capital increase plan later this year to further strengthen its capital base and improve its ability to withstand risk, the source added.

Since private banks were first piloted in 2014, China has seen 19 set up, which have played an important role in inclusive finance and digital finance. But as their business performance has diverged sharply, some of their shareholders have also run into difficulties.

Since 2024, the ownership of private banks has begun to change, with state-owned capital entering the sector and in some cases even taking controlling stakes. Wuxi Xishang Bank, Jiangxi Yumin Bank, and Anhui Xin’an Bank have all brought in local state-owned capital.

Amid pressure on the economy, local state-owned capital generally has a stronger willingness and greater capacity than private capital to invest in private banks and other small and mid-sized lenders, said Dong Ximiao, chief researcher of China Merchants Bank-China Unicom Consumption Finance. This makes it a practical choice for local governments to encourage state funds to invest in private banks, he said.

State investment helps optimize the ownership of private banks, stabilize expectations for their development, and to some extent integrate regional resources and enhance the synergy between private banks and their shareholders, Dong noted, adding that attention should be paid to the actual impact state capital has on the operation and development of private lenders.

Yillion Bank -- the first private bank in Northeast China and one of the only four private internet banks in the country -- was established by seven private businesses in 2017, with a registered capital of CNY3 billion (USD438.9 million). Its first main shareholder was Jilin Shengzhuo Investment with a 30 percent stake, followed by Meituan-backed Jilin Sankuai Information Technology with nearly 29 percent.

The bank had a net loss of CNY590 million (USD86.3 million) in 2024, while revenue rose 2.5 percent to CNY1.1 billion. It has not yet released its annual financial report for last year.

Yillion Bank raised its capital once, when its capital adequacy ratio approached the regulatory red line, temporarily easing its capital pressure. The lender’s capital adequacy ratio dropped from 22.7 percent in 2018 to 11.1 percent in 2019 and 10.6 percent as of Sept. 30, 2020. The regulatory red line is 10.5 percent.

Editor: Futura Costaglione