Bank of China

Everbright Bank gets green light to restructure

PUBLISHED : Thursday, 09 August, 2007, 12:00am
UPDATED : Thursday, 09 August, 2007, 12:00am

China Everbright Bank, the mainland's eighth-largest lender, has finally received regulatory approval for restructuring, more than three years after last releasing an official financial statement.

The approval is expected to pave the way for a reported 20 billion yuan government recapitalisation, a strategic partnership with a foreign bank and a potential US$1 billion stock-market listing.

The opaque bank, which maintained that it would not publish financial accounts until its reorganisation plan had been finalised, said on its website that further details would be released only after the plan was confirmed by its board and shareholders.

Chen Yuansheng, an Everbright spokesman, yesterday said specific information on the capital injection plan - which would be carried out by Central Huijin Investment, the government's investment arm - would be released within two months. It was reported that Standard Chartered is the prime contender to take a stake in the Beijing-based bank.

An injection of 20 billion yuan probably would be sufficient to strengthen Everbright's balance sheet in accordance with the central bank's requirements, which include a minimum tier one capital ratio of 4 per cent and a non-performing loan ratio of 5 per cent, analysts said.

Everbright had a bad loan ratio of 7.6 at the end of last year and chief executive Zhou Liqun this year revealed that unaudited total assets were 593.4 billion yuan at the end of last year.

'I suspect a cash injection from Huijin will occur later this year, especially as the former vice-chairman of the China Banking Regulatory Commission Tang Shuangning recently took over as Everbright's chairman,' said Lydia Lin, a bank analyst at Fitch Ratings.

Fitch gives Everbright an individual rating of 'E', putting it bottom of the ratings table along with the Agricultural Bank of China and Guangdong Development Bank, which also refuses to release regular financial statements.

'It is the worst of the joint-stock banks. But I expect its next financial report to be good because they have been waiting such a long time to release it,' Ms Lin said.

Moody's Investors Service gives Everbright a much healthier deposit rating of 'BA 1' after incorporating the likelihood of an imminent government recapitalisation in its evaluation.

Moreover, although the bank had not expanded quickly in recent years, it did sell some impressive wealth management, consumer business and mortgage products, Moody's analyst May Yan said.

Everbright's balance sheet has suffered from bad debt inherited after taking over China Investment Bank in 1999 and from loans made to parent company Everbright Group, some of which were not repaid.