(Yicai) April 24 -- Yillion Bank, backed by Chinese on-demand services giant Meituan, is following other Chinese private lenders in receiving investment from a state-owned entity, as private banking institutions address shareholder risks and optimize their governance structure.

Jilin Financial Holding Group, a state-owned financial investment enterprise under the Jilin provincial government, will take over Yillion Bank as its largest shareholder, with related procedures already underway in accordance with the law, an informed source told Yicai. Meituan will remain the lender’s second-largest shareholder.

After Jilin Financial invests in Yillion Bank, the lender will likely coordinate with its new controller to lay out a capital increase plan this year to further raise its capital strength and enhance its risk-resistance capacity, the source noted.

Nineteen private lenders have been established in China since the launch of pilot operations in 2014, playing a significant role in inclusive and digital finance. However, given the serious divergence in their operating conditions, some of their shareholders have faced hurdles.

From 2024, the equity structure of private banks has witnessed new changes with investment from state-owned capital, sometimes even for controlling stakes. For instance, private lenders Wuxi Xishang Bank, Jiangxi Yumin Bank, and Anhui Xin’an Bank have all brought in local state-owned capital.

Against the backdrop of great downward pressure on the economy, local state-owned capital is more willing and more capable to invest in private and other small- and medium-sized banks than private capital, said Dong Ximiao, chief researcher of China Merchants Bank-China Unicom Consumption Finance. Therefore, it is a realistic choice for local governments to promote local state-owned capital to invest in private banks.

After local state-owned capital invests, it helps optimize the equity structure of private banks, stabilize their development expectations, and, to a certain 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-owned capital has on the operation and development of private banks.

Yillion Bank was established by seven private enterprises in 2017, with a registered capital of CNY3 billion (USD438.9 million). Its original largest shareholder was Jilin Shengzhuo Investment with a 30 percent stake, followed by Meituan-backed Jilin Sankuai Information Technology with a nearly 29 percent stake.

Yillion Bank was the first private bank in Northeast China and one of the only four internet private banks in the country. It reported CNY1.1 billion in operating revenue in 2024, up 2.5 percent from the previous year, and CNY590 million (USD86.3 million) in net loss. It has not yet released its 2025 financial report.

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