An ICBC unit will invest up to 3 billion yuan for a more than 10% stake in Bank of Jinzhou, whose auditor quit in May citing loan inconsistencies.
ICBC and two of China’s big four distressed debt managers have been introduced as strategic investors to restructure the troubled Bank of Jinzhou.
The bank announced last Thursday (25 July) that it was in talks with the potential strategic investors under the guidance of regulators, but that “no legally binding agreement” had yet been made.
It has since been revealed that the three planned investors are ICBC Financial Asset Investment, a subsidiary of China’s largest bank; Cinda Investment, a subsidiary of China Cinda Asset Management; and Great Wall Asset Management.
The three will combine for a 17.3 percent stake in Bank of Jinzhou, Reuters reported, with ICBC Financial Asset Investment agreeing to invest up to CNY 3 billion (USD 436 million) for a 10.82% stake in the bank.
Jinzhou’s Hong Kong shares have been suspended since April due to its failure to produce a 2018 annual report following the resignation of its auditor, Ernst & Young Hua Ming LLP, which cited inconsistencies in the bank’s financial statements.
Smaller regional lenders have been facing intensified scrutiny since May, after regulators seized control over Inner Mongolia-based Baoshang Bank due to “severe credit risk”.
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Last week, the CBIRC (China Banking and Insurance Regulatory Commission) reportedly asked the four state-owned distressed debt managers to prepare contingency plans to take over or invest in high-risk small and medium-sized Chinese banks.
These so-called “bad banks” – China Huarong Asset Management, China Orient Asset Management, China Cinda Asset Management and China Great Wall Asset Management – were set up in the late 1999 to deal with bad loans at state-owned banks.
At the time, the four bought more than CNY 1 trillion in non-performing loans from commercial banks at face value to repair bank balance sheets.