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China Merchants Bank relieves president Tian Huiyu of his job in surprise move after US$11 billion stock sell-off amid talk of unspecified probes

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China Merchants Bank has unexpectedly relieved Tian Huiyu of his role as president and chief executive officer, after the stock plunged in Shanghai amid talk of investigations into the affairs of the country's largest retail bank.

Tian, 56, was relieved of his job with immediate effect, and would be assigned to another post, the Shenzhen-based bank said, without specifying his new role. Tian, appointed to the bank's top post in September 2013, will be replaced by chief financial officer Wang Liang as interim CEO, the bank said.

Wang, an economist, has a degree in monetary banking from the Renmin University of China, according to Merchants Bank's bilingual website, which has already removed Tian's photograph and biography. Wang joined the bank in 1995, working his way up the ranks in various roles until his promotion to First Executive Vice-President and CFO in August 2021.

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A senior executive of the bank was helping China's authorities with an unspecified investigation, the financial news portal Hexun.com reported today, without naming the officer or divulging the nature of the probe. The bank did not respond to the Post's request for comment, but told China Securities Journal it was looking into the reason for the stock's plunge.

The unexpected move followed the worst sell-off of Merchants Bank's shares in seven years on the Shanghai Stock Exchange, which erased about 71 billion yuan (US$11.1 billion) in one day from the value of China's third-largest lender by capitalisation.

Merchants Bank's shares fell by as much as 8.6 per cent to an intraday low of 42.78 yuan in Shanghai, before clawing back some of the losses to close at 43.39 yuan, marking the biggest one-day sell-off since a 9.4 per cent slump in August 2015, according to Bloomberg's data.

"There's market speculation that the executive is under probe," said Wang Zheng, chief investment officer at Jingxi Investment Management in Shanghai, speaking before Merchants Bank announced Tian's removal. "The impact on the stock price is palpable."

Before his appointment to China Merchants Bank, Tian served as head of the Beijing office for two years between March 2011 and June 2013 at China Construction Bank, the country's second-largest lender by assets. China's Vice-President and anti-corruption commissar Wang Qishan was vice-governor of Construction Bank from 1989 to 1994 before being called to serve in government.

A decline of such magnitude in Merchants Bank shares is rare. The lender is often touted by traders as a hedge against the broader-market decline because of its solid earnings capacity.

Logo of China Merchants Bank are seen in Hangzhou, Zhejiang province on May 12, 2013. Photo: Reuters. alt=Logo of China Merchants Bank are seen in Hangzhou, Zhejiang province on May 12, 2013. Photo: Reuters.>

The slide helped drag the Shanghai Composite Index down by 0.5 per cent to near a one-week low. The bank's Hong Kong-listed shares were last traded at HK$59.75 on Thursday before a two-day public holiday.

The sell-off rattled investors in the US$10.8 trillion onshore market after a beating from tech crackdown, corruption probes and Covid-19 lockdowns over the years. The Shanghai Composite Index has dropped 12 per cent this year, the worst among major benchmarks in Asia-Pacific. The MSCI China Index lost 21.6 per cent last year, the most since 2008.

First-quarter net income, due on Friday, probably rose 12 per cent from a year earlier, according to consensus forecasts from analysts tracked by Bloomberg. Earnings jumped 23 per cent last year.

China Merchants Bank has a market capitalisation of 1.1 trillion yuan, the third-most valuable lender after Industrial and Commercial Bank of China and Construction Bank. Its 17.5 per cent return on equity is the best in industry, versus 11.6 per cent peer average, according to Bloomberg data.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2022. South China Morning Post Publishers Ltd. All rights reserved.