Huishang Bank Plans to Acquire Four Baoshang Bank Branches, Invest in New Inner Mongolian Financial Institution

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Anhui-based commercial lender Huishang Bank (徽商银行) has unveiled plans take over branches and related staff of beleaguered Inner Mongolian lender Baoshang Bank.

Huishang announced on 6 February that it plans to acquire Baoshang Bank’s Beijing branch, Shenzhen branch, Chengdu branch and Ningbo branch, whose assets and business are collectively valued at around 106.5 billion yuan.

Huishang will issue USD$2.9 billion in tier-2 capital bonds by 2021 in order to ensure that its capital adequacy levels remain above the regulatory threshold.

Huishang Bank also announced that it planned to make a contribution of up to 3.6 billion yuan to the launch of a province-level legal person financial institution in Inner Mongolia, in exchange for an equity stake of approximately 15%.

The new financial institution will have registered capital of approximately 20 billion yuan, with Inner Mongolia’s finance department and state-owned enterprises jointly holding approximately 50.16% of equity.

The Depository Insurance Fund Management Co., Ltd. (存款保险基金管理有限责任公司) will hold approximately 29.84%, while China Construction Bank (CCB) subsidiary Jianxin Finance Asset Investment Co., Ltd. (建信金融资产投资有限公司) will also be a key shareholder.

Huishang Bank was one of the biggest creditors of Baoshang Bank, which was forcibly acquired by the Chinese central government in 2019, during an extremely rough year for China’s regional banks.

On 24 May 2019 the Chi­nese cen­tral bank and the China Bank­ing and In­sur­ance Reg­u­la­tory Com­mis­sion (CBIRC) an­nounced the launch of a takeover of Baoshang Bank for a pe­riod of one year in the wake of “se­vere credit risk,” with man­age­ment of the bank en­trusted to lead­ing state-owned lender China Con­struc­tion Bank. 

The move marked the first time that Chi­nese reg­u­la­tors have launched an of­fi­cial takeover of a com­mer­cial bank, as well as the sec­ond time in lit­tle over a year that they had taken over a fi­nan­cial in­sti­tu­tion fol­low­ing their ac­tions with re­gard to An­bang Group in Feb­ru­ary 2018. 

Do­mes­tic an­a­lysts say that the de­ci­sion helped to pre­vent a bank run in the re­gion of In­ner Mon­go­lia, while oth­ers re­ferred to the in­ci­dent as a “mini-Lehmann mo­ment” which would lead to the con­sol­i­da­tion of other small-scale Chi­nese lenders. 

Related stories

Baoshang Bank Takeover Con­tin­ues to Ham­per In­ter­bank CD Is­suance of Chi­na’s Smaller Lenders

Chi­nese Cen­tral Bank Sheds Fur­ther Light on Baoshang Bank Takeover

Smaller Lenders Seen Con­sol­i­dat­ing in Wake of Baoshang Bank’s “Mini-Lehman” Mo­ment

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