ABC to use strategic investor for rural finance

Agricultural Bank of China (ABC) plans to introduce a strategic investor specializing in rural finance and create a business division concentrating on rural clients, the Wall Street Journal reported. The decision is part of ABC’s internal reform strategy and complies with government requirements to improve services to rural areas, although such areas have not been as profitable as urban markets. The rural business division would concentrate on county-level operations, separating management of the bank’s rural and urban businesses. ABC was recapitalized througha  US$19 billion government bailout last November and became a joint stock company in January. The new division will be based on a trial venture launched in seven provinces in March. It is hoped the division will achieve a 0.5% return on assets in 2009, rising to 0.8% or higher in future. ABC also wants to cap the non-performing loan ratio of the rural business division at 5%.