Cinda Asset Management shares fall 7pc after profit growth disappoints

PUBLISHED : Thursday, 28 August, 2014, 1:24pm
UPDATED : Thursday, 28 August, 2014, 1:24pm

The share price of China Cinda Asset Management fell almost 7 per cent in morning trading on Thursday to HK$3.93 after the toxic-loan manager posted slower growth than its unlisted peers.

Net profits in the first half of the year climbed 30 per cent year on year to 5.29 billion yuan (HK$6.66 billion) at the company, which raised US$2.5 billion in a highly oversubscribed initial public offering in Hong Kong late last year.

State media reported that profits at unlisted China Huarong Asset Management, which was set up by the Ministry of Finance in 1999, along with Cinda and two other asset managers, rose 57 per cent in the period, while profits at unlisted China Great Wall Asset Management grew 54 per cent.

Erin Lee, an analyst at Yuanta Securities in Shanghai, said “the market probably expected higher bottom-line growth from the company” than from its two competitors.

China set up the four “bad banks” to clean up non-performing loans at its biggest financial institutions as they prepared to go public a decade ago.

Although the companies were originally scheduled to be dismantled as they completed the restructuring and liquidation of those bad assets, they have, on the contrary, grown in size and expanded their licensed lines of business into broking and many other financial services.

Nearly half of Cinda’s income came from distressed assets in the first half. That income grew about 30 per cent year on year to 9.4 billion yuan, mainly due to an increase in non-performing loans in the country, Lee said in a report on Thursday.

By June, Cinda’s assets totalled 482 billion yuan, an increase of 70 per cent year on year.

Cinda and the three other central asset managers will likely face competition in toxic-asset management in coming years as regional governments begin establishing their own asset managers to handle a wave of bad debt.