Regional Lender Hengfeng Bank Set to Receive 100 Billion Yuan Bailout from Beijing

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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.

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