The travails of another beleaguered Chinese regional bank have prompted the launch of a rescue package by Beijing which will confer control upon central state-owned investors.
Shandong’s Hengfeng Bank (恒丰银行) ) has announced that it plans to raise 100 billion yuan (approximately USD$14.3 billion) via a private placement with leading government finance vehicles.
Hengfeng will sell 60 million new shares to state-owned investor Central Huijin Investment, as well as 36 billion shares to Shandong Financial Asset Management, and four billion shares to Singapore’s United Overseas Bank (UOB) and other investors.
UOB announced on Wednesday 18 December that it would subscribe for 1.86 billion shares for a consideration of $360 million, bringing its total stake in Hengfeng to 3.3 billion shares.
UOB is currently Hengfeng’s second-largest shareholder, with a 13% stake in the Shandong bank as of the end of the second quarter.
The share sale, which remains subject to approval from regulators, will make Central Huijin and Shandong Financial Asset Management controlling shareholders in Hengfeng.
In June the China Banking and Insurance Regulatory Commission (CBIRC) announced that it was accelerating its restructuring of Hengfeng after the mid-sized bank failed to provide financial statements for two consecutive years.
Hengfeng subsequently became the third regional bank rumoured to receive intervention measures from the central government, with domestic media reports pointing to the possibility of a strategic investment from Central Huijin.
2019 has been a tumultuous year for smaller regional lenders in China, with a string of bank runs and upsets which in several cases necessitated intervention from the central government.
Two regional banks in China met with abortive bank runs within a two week period in early November – Yingkou Bank in the northeastern province of Liaoning and Yichuan Rural Commercial Bank in Henan province.
Earlier in the year the Chinese government took over Inner Mongolia’s beleaguered Baoshang Bank in May, for the first such forcible acquisition in more than two decades, while a trio of leading state-owned financial institutions subsequently took over the north-eastern Bank of Jinzhou in July.