[ET Net News Agency, 30 July 2019] S&P Global Ratings said today that a planned
stakeholder change for China's troubled Bank of Jinzhou shows the Chinese government
remains highly supportive of its banking sector.
The move also indicates policymakers are adopting an alternative method of managing
troubled banks after the recent takeover of Baoshang Bank.
Several major state-owned financial institutions will together purchase about 17.3% of
shares in the China-based, Hong Kong-listed Bank of Jinzhou from existing shareholders.
Industrial and Commercial Bank of China Ltd. (ICBC)(01398) will invest up to RMB3 billion
(US$435 million) for a 10.82% stake through its unit ICBC Financial Asset Investment Co.
Two distressed asset managers, China Cinda Asset Management Co. Ltd. (01359) and Great
Wall Asset Management Co. Ltd., will provide the remainder of the support.
"The forms of support are obviously different for Bank of Jinzhou and Baoshang Bank but
policymakers' objectives appear to be the same: to maintain system stability while
strengthening discipline in the long term," said S&P's credit analyst Liang Yu.
Debtholders of Bank of Jinzhou appeared to benefit from coordinated support effort as
there is no mention of any debt restructuring or "hair cuts." The presence of these new
shareholders is likely to boost domestic market confidence on Bank of Jinzhou and the bank
could gain some financial flexibility.
In comparison, the takeover of Baoshang Bank may lead to marginal losses for certain
debtholders. In Baoshang's case, the takeover and the initial expectation of a meaningful
haircut for certain senior unsecured corporate and interbank exposures led to temporary
liquidity issues and widening credit pricing.
"We anticipate Chinese authorities will continue to take a very pragmatic approach to
handling troubled banks, even a small one, as they balance the different objectives
depending on the circumstances," said S&P's credit analyst Harry Hu. "In the case of
Baoshang, authorities sent a stronger signal on discipline. In the case of Jinzhou, system
stability appeared to weigh more." (KL)