China Bank of Jinzhou says in talks with possible investors, renewing contagion worry (updated)

Bank of Jinzhou Co

25/07/2019 09:34

(Adds details, background)
    BEIJING/SHANGHAI, July 25 (Reuters) - China's Bank of
Jinzhou, which suspended trading in its shares earlier this year
and saw its auditor quit, said on Thursday that it is in talks
with multiple parties for possible strategic investment, and
that it is operating normally.
    The statement on the bank's website triggered fresh jitters
about the health of smaller banks in China's northeast, after
regulators took over Inner Mongolia-based Baoshang Bank on May
24, rattling China's interbank markets and sending some firms'
borrowing costs spiking.
    Thursday's statement, on the bank's website, follows a
Reuters report late on Wednesday that officials from the local
branch of China's central bank and other regulators had recently
met financial institutions in Liaoning province to discuss
measures to deal with liquidity problems at the lender.
 urn:newsml:reuters.com:*:nL4N24P31K
    Discussion on possible strategic investment is under
guidance from local government and regulatory bodies, the Hong
Kong-listed bank  0416.HK  said in its statement.
    Last month, China's central bank introduced a credit risk
hedging tool for holders of debt issued by Bank of Jinzhou, the
latest measure by regulators to calm market nerves about the
health of smaller banks.  urn:newsml:reuters.com:*:nL4N23H271
    In a separate statement on Thursday to Reuters, China's
banking and insurance regulator said it will study market-based
ways to restructure and reform high-risk institutions.
 urn:newsml:reuters.com:*:nB9N24J00R
     The rare regulatory takeover of Inner Mongolia-based
Baoshang Bank on May 24 sparked widespread concern in China's
interbank market.
    Unlike the aftermath of Baoshang, when some market financing
rates spiked, a trader at an Asian bank in Shanghai said that
she saw relatively little market reaction to Thursday's news,
with rates stable in the primary market and yields on negotiable
certificates of deposit (NCD) rising only slightly in secondary
trading.
    "The rise is not as exaggerated" as after the Baoshang Bank
takeover, she said.
    But another trader said that the announcement had still
sparked some selling of NCDs issued by banks from northeastern
China.
    "This is a bigger bomb than Baoshang," he said, adding that
he sees Jinzhou's woes as a likely trigger for problems at other
banks in northeastern China, which already face relatively high
funding costs in the interbank market.
    Bank of Jinzhou has delayed the release of its annual report
for 2018, and its shares have been suspended since April. The
lender's auditor, EY, had quit before signing off on the bank's
2018 accounts in June, after being unable to agree with the bank
on usage of some loans.
    Bank of Jinzhou's assets stood at 748.39 billion yuan ($109
billion) by end-June 2018, while its net profit was up 7.7%
year-on-year to 4.3 billion yuan, according to its semi-annual
report in 2018.
    ($1 = 6.8709 Chinese yuan)
    

 (Reporting by Cheng Leng and Tony Munroe in Beijing, and Andrew
Galbraith in Shanghai; Editing by Richard Borsuk)
 ((cheng.leng@thomsonreuters.com; +8610-5669-2129;))