Caixin
Jan 08, 2020 08:31 PM
FINANCE

Exclusive: In Wake of Baoshang Bank’s Collapse, Regional Lender Comes to the Rescue

An advertisement for Baoshang Bank in Beijing, on Sept. 8, 2018.
An advertisement for Baoshang Bank in Beijing, on Sept. 8, 2018.

The bank that lost billions of yuan on its investments with troubled Baoshang Bank Co. Ltd. is now coming to its rescue, Caixin has learned.

Hong Kong-listed Huishang Bank Corp. Ltd. has disclosed a plan to purchase part of the assets and liabilities of a banking institution — an institution that Caixin has learned is Baoshang Bank, which regulators took the rare step of taking over in May.

Huishang Bank also announced that it plans to invest in a new provincial-level commercial bank, according to a filing to the Hong Kong Stock Exchange on Tuesday. The city commercial bank, which is based in East China’s Anhui province, said that it will make a one-off capital contribution of no more than 3.6 billion yuan ($518.5 million), giving it a stake up to 15% in the new bank.

This investment is also related to Baoshang Bank, sources with knowledge of the matter told Caixin. The new commercial bank is part of regulators’ plan to defuse the troubled lender’s risks. Just like how regulators restructured scandal-plagued Anbang Insurance Group Co. Ltd., the authorities plan to set up a new entity — in this case a new commercial bank — to take over part of Baoshang Bank’s problematic assets, the sources said.

The assets and liabilities that Huishang Bank plans to acquire are most likely those of Baoshang Bank’s four branches, Caixin has learned.

The acquisition looks like it could provide Huishang Bank with a backdoor to expand into other provinces. It had 17 city-level branches nationwide as of the end of 2019, with only one outside of Anhui.

“Large (state-owned) banks and joint-stock banks already have branches in every province-level region,” said an executive at a joint-stock bank who was familiar with the situation, adding that only city commercial banks that don’t have that many branches outside their own regions are willing to expand.

Huishang Bank took about 6 billion yuan of losses on the interbank investments it made with Baoshang Bank, Caixin previously reported.

To minimize the impact of its planned investments, Huishang Bank plans to carry out a private share placement to replenish its capital, it said in the filing.

Contact reporter Timmy Shen (hongmingshen@caixin.com, Twitter: @timmyhmshen) and editor Michael Bellart (michaelbellart@caixin.com)

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