Minsheng Bank studying the set up of bad-loan company
October 24, 2016 Category Finance, Weekly
China Minsheng Banking Corp is studying plans to set up an bad-loan asset management company to get rid of some of its USD5.7 billion of non-performing loans (NPLs). If the proposal proceeds, Minsheng Bank will be the first Chinese lender to operate a so-called bad-loan manager. The Beijing-based lender would be entering a market created in 1999, when China’s government established four asset managers to help clean up a banking system riddled with soured credit. Minsheng President Zheng Wanchun previously ran one of the firms – Great Wall Asset Management Co – and was an executive at another, Huarong Asset Management Co. With economic growth slowing, China’s banks once again find themselves under pressure from mounting bad debts. Minsheng Bank’s bad-loan ratio rose to 1.67% as of June 30, the highest since 2007. Only asset management companies (AMCs) are allowed to buy bad loans directly from banks. After purchasing non-performing debt, they typically restructure it or sell the loans on to other investors. The four national asset managers and 21 provincial ones are benefiting from a “buyer’s market” for bad loans, paying as little as 20 cents on the dollar, Guotai Junan Securities Co analysts said in a note in March, adding that the authorities were likely to license more firms. Huarong’s profit jumped 35% in the first half from a year earlier, while China Cinda Asset Management Co increased net income by 2.4%, the China Daily reports.
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