What’s new: China Huarong Asset Management Co. Ltd. agreed to sell a 72% stake in its securities brokerage unit to a subsidiary of state-owned investment firm China Reform Holdings Corp. for 10.93 billion yuan ($1.72 billion), the state-owned bad asset manager said Thursday in a regulatory filing.
After the sale, Huarong will no longer own any interest in Huarong Securities. State-owned Guangzhou Industrial Investment Holdings Group owns 10.24% of the brokerage. The enterprise through its subsidiaries owns licenses for securities brokerage, futures trading, private equity and public offering of funds, justifying the sale price, industry participants said.
Huarong Securities reported revenue of 802.6 billion yuan and net profit of 85.86 million yuan for the first three quarters of 2021. Its net assets were valued at 13.44 billion yuan.
The background: Huarong is majority owned by the Finance Ministry. It is one of China’s four giant bad asset managers established in the aftermath of the late 1990s Asian financial crisis to clean up soured loans in the banking industry.
The company gradually deviated from its original mission and embarked on a domestic and international spending spree under the leadership of former Chairman Lai Xiaomin, who was executed in January 2021 for crimes including bribery.
Huarong’s troubles emerged in late March when the company delayed its annual report. The scandal-plagued enterprise in August finally reported that it incurred a record loss of 102.9 billion yuan in 2020, triggering the suspension of its shares in Hong Kong and roiling markets across Asia.
Huarong disclosed a state-backed rescue package in August under which a consortium led by China Life Insurance (Group) Co. would inject billions of yuan to prevent the company from defaulting on billions of dollars in offshore debt. As part of the restructuring, Huarong has been offloading noncore assets.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bob.simison@caixin.com)
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