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Yusys Seeks A Second Listing In Hong Kong

The Baidu-backed provider of technology services for banks reported falling revenue last year, reflecting a challenging environment for its customers

Key Takeaways:

Shenzhen-listed Yusys has filed for a Hong Kong IPO at a time when its bank customers are struggling

The company's revenue dropped by a quarter last year, forcing it to aggressively cut costs to maintain its profits

Getting investors excited about anything related to banking in China looks like a tough sell right now, as lenders grapple with multiple issues flowing from the nation's sluggish economy.

And yet that's what Yusys Technologies Co. Ltd. (300674.SZ) is trying to do as it files for a Hong Kong IPO to complement its existing listing in Shenzhen. The big challenge for the Baidu-backed company will be finding ways to convince investors of the big potential for its business helping China's banks upgrade their technology, even if that potential may lie several years down the road.

Banking isn't a sexy business to begin with, and it isn't growing fast in China. The country's weak economy has softened demand for borrowing by both consumers and companies, dampening business for banks. Those same banks also need to be extra cautious about the loans they make to avoid getting hit by defaults from shaky borrowers. Such constraints are pressuring bank profits, leading them to spend less on third-party services like the ones Yusys supplies.

Yusys' financial performance is "directly exposed to risks inherent in the banking industry," the company said in its recently filed IPO document.

Yusys' latest annual results show how the growing chill for Chinese banks is infecting their third-party suppliers. The company's revenue dropped by a quarter to about 4 billion yuan ($557 million) last year, according to its prospectus filed last Thursday. It derives most of its revenue from services that help banks digitalize their operations, and its customers include China's "big four" national banks, as well as the ...