Caixin
Dec 19, 2019 05:05 AM
FINANCE

China’s Hengfeng Bank Gets $14.21 Billion Bailout

Central Huijin Investment Ltd. will subscribe for 60% of Hengfeng Bank’s 100 billion yuan share sale. Photo: IC Photo
Central Huijin Investment Ltd. will subscribe for 60% of Hengfeng Bank’s 100 billion yuan share sale. Photo: IC Photo

China’s Hengfeng Bank will raise 100 billion yuan ($14.21 billion) through a private placement to a group of state and foreign investors.

The troubled Shandong-based lender will issue 100 billion shares, Hengfeng said Wednesday in a statement. The bank didn’t disclose the price of the private placement, but one of the investors said the shares will be sold for 1 yuan each.

The investment in the lender by state-owned capital marks part of regulators’ efforts to guide high-risk financial institutions into mergers or restructuring to contain risks. Hengfeng Bank is the third commercial lender to receive state assistance since May, following the takeover of Inner Mongolia-based Baoshang Bank Co. Ltd. and the restructuring of Liaoning-based Bank of Jinzhou Co. Ltd.

Hengfeng Bank, which came into existence in 2003, is one of the 12 national joint-stock commercial banks, with 334 branches nationwide. The lender has been marred by scandals in recent years. Two of Hengfeng Bank’s former heads have come under investigation for alleged embezzlement. The bank also failed to disclose its financial reports for two consecutive years through 2018.

Central Huijin Investment Ltd., an investment arm of China’s sovereign fund, China Investment Corp. (CIC), will subscribe for 60 billion shares in the sale; an asset management firm controlled by the Shandong provincial government, for 36 billion shares; and Singapore’s United Overseas Bank and other investors, for the remaining 4 billion shares, according to the statement.

United Overseas Bank is already an investor at Hengfeng Bank. The Singapore bank tried to sell its Hengfeng shares since the end of 2016 but failed to find a buyer. The bank said Wednesday it would purchase an additional 1.86 billion shares at 1 yuan each, increasing its holding in Hengfeng to 3.3 billion shares.

The plan is subject to the approval by the China Banking and Insurance Regulatory Commission (CBIRC).

In October, the regulator granted Hengfeng Bank approval to increase its registered capital to 11.2 billion yuan from 1.7 billion yuan in 2008. The increase is a bookkeeping measure to officially recognize the capital that Hengfeng Bank has received over the past 10 years, paving the way for the lender’s restructuring.

Hengfeng Bank had 1.2 trillion yuan in total assets at the end of 2016, according to its annual report that year, the most recent one it released. The bank has nearly 140 billion yuan of nonperforming assets, among which the bank can probably recover about 80 billion yuan, Caixin learned from exclusive sources.

Contact reporter Denise Jia (huijuanjia@caixin.com)

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