StanChart-linked China Bohai seeks to dispose of $4 bln in bad loans (updated)

China Bohai Bank

22/07/2024 05:23

(Adds details in paragraphs 5-8, 14, analyst comments 10-11)
    By Selena  Li
       HONG KONG/BEIJING, July 22 (Reuters) - China Bohai Bank
 9668.HK  said on Monday it is looking to sell 29 billion yuan
($3.99 billion) worth of non performing loans as the faltering
Chinese economy and deepening property sector problems pressure
lenders to dispose of bad assets.
    The Tianjin-based bank, 16.2% owned by British lender
Standard Chartered  STAN.L , expects a financial hit of 3.9
billion yuan from the sale, the bank said in a statement on the
Hong Kong Stock Exchange.
    It added it should receive no less than 17.7 billion yuan
for the transaction.
    Bohai Bank is looking to get large soured loans off its
balance sheet and said there are six potential buyers.
    The six potential buyers include the local Tianjin branches
of China's four major asset management companies (AMCs): China
Orient Asset Management, China Cinda Asset Management, China
Great Wall Asset Management and China CITIC Financial Asset, and
two local bad loan management firms Tianjin JR Assets Management
and Tianjin Binhai Zhengxin Assets Management.
    The four AMCs were established in the late 1990s following
the Asian financial crisis to acquire and dispose of
non-performing loans from state-owned banks. Over time, they
have expanded their operations into broader financial services.
    Bohai Bank, China Cinda Asset Management and China CITIC
Financial Asset Management did not immediately reply to requests
for comments. Calls to China Orient Asset Management, China
Great Wall Asset Management, Tianjin Binhai Zhengxin and local
state assets supervisor in Tianjin went unanswered.
    China's economy grew much slower than expected in the second
quarter, with the worsening property market continuing to weigh
on domestic banks. Smaller lenders are particularly vulnerable
due to their higher exposure to less-developed regions and
weaker capital positions.
    The disposal comes as asset quality at smaller banks
worsens, said Christopher Beddor, deputy China research director
at Gavekal Dragonomics.
    "The primary causes are the property-sector downturn and
sluggish economic growth," said Beddor. "Many banks have
responded by aggressively disposing of troubled assets in order
to keep their reported non-performing loan ratios low."
    Foreign banks are feeling the pinch of Chinese lenders'
deteriorating businesses.
    StanChart had taken a total of $850 million in writedowns in
the last few quarters on its stake in Bohai Bank and said in May
it remained cautious about the sector as residential sales
volumes continue to decline.
   The Hong Kong-listed lender's share price has shrunk 80%
since its listing in 2020.
    The net profit of the Chinese lender in 2023 is down 17%
from a year ago, its annual report shows. The bank's
non-performing loan ratio stood at 1.78% at the end of 2023,
higher than an industry average of 1.59%.

($1 = 7.2695 Chinese yuan)

 (Reporting by Selena Li in Hong Kong, Ziyi Tang and Ryan Woo in
Beijing; Editing by Sam Holmes)
 ((Selena.Li@thomsonreuters.com; +852 39525868;))