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China's ICBC and Cinda Asset Management to take combined 17.3% in Bank of Jinzhou

FILE PHOTO: People walk past a branch of the Industrial and Commercial Bank of China (ICBC) in Beijing, China, April 1, 2019.

BEIJING (Reuters) - The Industrial and Commercial Bank of China (ICBC), the country's largest lender by assets, and China Cinda Asset Management, one of China's four largest bad banks, said on Sunday they would take stakes in troubled Bank of Jinzhou.

Concern has been growing about Bank of Jinzhou since the Hong Kong-listed lender suspended trading in its shares earlier this year and saw its auditor quit. The bank said on Thursday it was in talks with multiple parties for possible investments.

ICBC's ICBC Financial Asset Investment Co unit signed an equity transfer agreement to invest up to 3 billion yuan ($436 million) in a 10.82% stake of Bank of Jinzhou, it said in a statement filed to the Shanghai Stock Exchange.

Hours after the state lender's announcement, Cinda said in a statement to the Hong Kong Stock Exchange its wholly-owned Cinda Investment Co would invest in a 6.49% stake of Bank of Jinzhou, though it didn't give the value of the deal.

The investments come as regulators look to diversify their approach to supporting highly indebted smaller banks and contain financial risks.

China's banking and insurance regulator has told the country's biggest distressed debt managers to prepare contingency plans to take over or invest in high-risk small and medium-sized Chinese banks, Reuters reported Friday.

"The investment is to serve country's supply-side reform in the financial sector and enhance the bank's capability to serve the real economy," the ICBC said in its statement. The deal will be conducted with the unit's own funds, ICBC added.

In May, a shock government-led takeover of little-known Baoshang Bank revived concern about the health of hundreds of small lenders as the slowing economy results in more sour loans, testing their capital buffers and draining their reserves.

"For Baoshang Bank, the government took a state takeover, while for Bank of Jinzhou, the government introduced some state-owned strategic investors," said Dai Zhifeng, analyst with Zhongtai Securities Co.

"The latter approach is more market-oriented and showcased the determination of regulators to resolve problematic banks, while injecting confidence into the market," Dai said.

($1 = 6.8785 Chinese yuan renminbi)


(Reporting by Cheng Leng and Catherine Cadell; Editing by Robert Birsel and David Holmes)