Troubled Regional Bank’s Future Could Hinge on a Shareholder Vote
Hong Kong-listed Huishang Bank Corp. Ltd. will hold a shareholder meeting on Feb. 22 to decide whether to purchase part of the assets of Baoshang Bank Co. Ltd., which regulators took the rare step of taking over in May, according to a filing to the Hong Kong Stock Exchange on Thursday.
Huishang, a city commercial bank based in East China’s Anhui province, had previously come to the rescue of the troubled Baoshang Bank by offering to participate in creating a new bank that will take over some of its problematic assets. Huishang could gain a foothold in other provinces as part of the deal.
The company confirmed in the filing that it plans to make a one-off capital contribution of up to 3.6 billion yuan ($515 million) to help establish a new provincial bank in the Inner Mongolia autonomous region — where Baoshang is headquartered — that operates only in that region.
Caixin can reveal the new bank will be called “Meng Shang Bank Co. Ltd.” (蒙商银行股份有限责任公司) It will be established with proposed registered capital of 20 billion yuan with about 50.16% equity interest held by financial vehicles and state-owned enterprises of Inner Mongolia, 29.84% equity interest held by Deposit Insurance Fund Management Co. Ltd., a wholly-owned company of the People’s Bank of China and a nationally designated deposit insurance management entity, according to the filing.
Caixin previously revealed how, in much the same way that regulators restructured scandal-dogged Anbang Insurance Group Co. Ltd., they plan to set up a new entity — in this case a new commercial bank — to take over part of Baoshang Bank’s problematic assets.
Huishang Bank plans to hold about 15% of the new bank’s equity, and CCB Financial Asset Investment Co. Ltd., a subsidiary of China Construction Bank Corp., will hold about 5%, the filing said. The shareholding structure is subject to regulatory approval.
The investment comes as China continues to feel shockwaves from the outbreak of a new coronavirus. The epidemic “will not drag on the progress of the restructuring work,” a source participating in the restructuring told Caixin.
The assets and liabilities that Huishang plans to acquire are those of Baoshang Bank’s four branches, and it will take over responsibility for their employees and offices, according to the filing.
Caixin has been told Huishang doesn’t plan to conduct any layoffs in the three years after it takes over the four branches’ 1,500 employees.
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.
Huishang Bank took about 6 billion yuan of losses on the interbank investments it made with Baoshang Bank, Caixin previously reported.
Contact reporter Timmy Shen (firstname.lastname@example.org, Twitter: @timmyhmshen) and editor Flynn Murphy (email@example.com)
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