Bank of Jinzhou annual profit rises 131 per cent to HK$5.84 billion

PUBLISHED : Friday, 25 March, 2016, 9:27pm
UPDATED : Friday, 25 March, 2016, 10:22pm

City commercial lender Bank of Jinzhou, which has close ties to the Hanergy Group whose Hong Kong unit is under investigation by regulators, reported a 131 per cent rise in 2015 net profit to 4.9 billion yuan (HK$ 5.84 billion), largely due to good yields on its portfolio of interest-earning assets.

Executives at Liaoning-based Jinzhou, which raised HK$6 billion in its Hong Kong IPO in December, said the bank will need to raise addition funds to supplement its capital level. The bank’s core tier-one capital adequacy ratio is 8.96 per cent, compared to the 7.5 per cent minimum required by

the China Banking Regulatory Commission through to 2018.

It plans to issue 1 billion new shares in Hong Kong to no more than 10 investors, and is also hoping to launch an IPO in Shenzhen or Shanghai, issuing 1.9 billion shares.

Another option under consideration is to issue 4 billion yuan worth of tier-two bonds.

If successful, the two equity offerings will expand its capital base by 15 per cent and 25 per cent.

It will also dilute the holdings of the bank’s investors just four months after the Hong Kong IPO.

In the lead up to its IPO, Jinzhou said it had issued a loan to Hanergy in the form of a 9.4 billion yuan credit.

Hanergy, a once high-flying solar energy firm that attracted global attention, has become mired in an investigation by Hong Kong regulators of the links between its Hong Kong unit and the parent company. Its shares have been suspended since May last year.

The bank said it has been trying to reduce the loan. Hanergy was the only cornerstone investor in Jinzhou’s IPO.

“For such a large exposure, they will need time to exit,” said Nicole Wu, China financial analyst at DBS.

“They have made a preliminary announcement with a shortened version of the results. They don’t provide the full disclosure which usually runs to 300 pages. All of the analysts who put up their hand for questions at the briefing were the sponsors. No one covers this stock ­­-- not even the sponsors who helped list it.”

The proposed Shenzhen or Shanghai listing will not be Jinzhou’s first attempt. Its previous ones were cancelled after the China Securities Regulatory Commission raised concerns about loans on its books. Its H-share listing last year was preceded by questions from market operator Hong Kong Exchanges & Clearing. Many of these questions related to its credit exposure to Hanergy.

Jinzhou said its interest earnings in 2015 rose 92 per cent, while fee income rose 330.5 per cent, trading gains were up more than 2,0573 per cent, while forex-related gains were up 991 per cent.

“The explosive earnings are actually very capital consuming. Most of it came from a big increase in investment securities,” DBS’ Wu said.