CHINA Minsheng Banking Corp.’s plan for staff stock incentives may be matched by its State-controlled rivals in a boost for Chinese bank shares floundering at the lowest valuations in the world.

    Minsheng’s shares surged yesterday after it said it would raise as much as 8 billion yuan (US$1.3 billion) by selling new stock to key employees at a 10 percent discount to last week’s closing price on the mainland.

    The privately owned bank is leading the way in opening up a new source of funding for lenders and aligning employees’ interests with share performance. With the government urging State-owned enterprises to improve incentives, State lenders will follow suit, boosting their stock prices, according to analysts from Sinolink Securities Co. and China International Capital Corp.

    “This is a significant move and will surely lend support for banks’ valuations to recover,” said Wang Yichuan, a Wuhan-based analyst at Changjiang Securities Co., adding that Minsheng shares have the potential to rise about 10 percent in the “short term.” “That said, the program still faces a lot of uncertainties and hurdles, including regulatory approval and employees’ feedback.”

    “This is an epoch-making program that forces the bank and its employees to take their share price more seriously and start to think long-term,” Ma Kunpeng, an analyst with Sinolink, said yesterday. “Investors are worried that Chinese banks have been chasing short-term profit by taking on too much risky shadow-banking activities.” Ma added that some employees offered shares may feel obliged to purchase them to show their commitment.

    Industrial & Commercial Bank of China Ltd. (ICBC) and its 15 domestically-listed peers are trading at an average 4.9 times their estimated earnings for this year, the lowest globally for lenders with a market value of more than US$10 billion.

    Shares of Chinese banks have been battered by rising defaults and constraints on credit growth, with the economy poised for the weakest expansion this year since 1990 and President Xi Jinping repeating Sunday that the nation’s “new normal” is for slower growth.

    China has pledged to improve incentives at State-owned firms, reduce State ownership and hire more top executives from outside government as part of efforts to sustain growth by moving to a more market-driven economy. (SD-Agencies)