China Merchants Banks to Gain from Employee Stock Incentive Plan

Published By : 14 Apr 2015 | Published By : QYRESEARCH

With an announcement regarding employee stock incentive plan, China Merchants Bank Co. is expected to register the biggest gain in more than six years, with its share value rising to 20 percent in Hong Kong. The increased share value of the bank will help it to raise 6 billion yuan in a private placement to no more than 8,500 employees. 

According to China International Capital Corp., other banks are going to follow the trend. Ping An Bank Co. may be the next lender to go ahead with the incentive plans, followed by China Minsheng Banking Corp., the first Chinese private bank. Depending on the Chinese government’s approval, Bank of Communications Co. and Bank of China Ltd. might follow the suit. 

This move reflects the government’s efforts to increase the role of the markets in the economy with the staffs getting the benefits of the share performance. In January 2009, the Ministry of Finance had put hold on employee stock incentive plans at financial institutions owned or controlled by the state. However, in September 2014, the finance ministry changed its stance and worked on planning trials to allow the staffs at the state-owned banks to spend about 30 percent of their salaries to buy shares.  The Merchant’s Bank’s incentive plan will be subjected to the approvals from the regulatory authorities. Once approved, the plan would be valid for six years. Under the plan, shares worth of 4 billion yuan would be sold to the employees in two additional tranches and the purchased share will have a lock-up period of three years. 
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