Hong Kong-listed Bank of Tianjin reports 786 million yuan risk case

Bank of Tianjin reports ‘risk incident’ involving bill financing business

PUBLISHED : Friday, 08 April, 2016, 8:12pm
UPDATED : Friday, 08 April, 2016, 8:12pm

Bank of Tianjin, a city commercial lender which debuted on the Hong Kong stock market on March 30, said it was involved in an investigation involving a “risk incident” in its bill financing business potentially worth 786 million yuan (HK$941.4 million)。

“Recently, a risk incident occurred to our Shanghai Branch in relation to its business of notes held under resale agreement. After investigation the relevant amount exposed to risks is 786 million yuan,” chairman Yuan Fuhua said in the filing to the Hong Kong Exchange and Clearing on Friday, nine days after its trading debut.

The bank said it has been working with the public security authority on the investigation, and enhancing communication with related institutions to safeguard the funds to the “greatest extent”.

Mainland media 21st Century Business Herald reported that the bank reached an agreement with another lender, worth 900 million yuan, through a small sized financial agency. The agency only paid back 200 million yuan when the notes were due, leaving the 700 million yuan and interests unpaid, the report said.

The Bank of Tianjin reported the case to police after the funds did not arrive in one of its accounts on April 6, Bloomberg reported, citing a person with knowledge of the matter.

Bank of Tianjin’s shares closed flat at HK$7.32 on Friday after its announcement at noon, with merely HK$11.58 million of turnover.

Chen Shujin, an analyst with DBS Vickers, said she expected similar notes-related risks to be disclosed by mainland based banks before June.

“A large sum of capital, in the form of banks’ notes, should have flowed into China’s stock market early last year during the bull run, most traded in the grey market. While the investors would find themselves unable to cash out the same amount after the stock rout, causing the notes-related accidents,” she said.

The news came after the revelation of a 3.9 billion yuan notes scam in Agricultural Bank of China in January. The case, which took place in 2015, involved two employees of the bank who sold the notes to invest in the A-share market. As a wave of panic selling engulfed the market beginning in mid-June last year, the value of the underlying shares fell sharply, causing a possible loss of 3.9 billion yuan to one of China’s biggest four banks.

China Citic Bank in January also reported a risk incident in its notes business worth 969 million yuan.

The China Banking Regulatory Commission this week has issued a notice requiring banks to improve their risk controls on commercial bills and to check their authenticity, Bloomberg reported, citing source who knows the matter.

Bank of Tianjin is China’s eighth city commercial bank listed in Hong Kong. It raised 6.42 billion yuan in the IPO pricing its shares at HK$7.39 apiece, on the lower end of its indicative range between HK$7.37 and HK$9.58, as the retail tranche of the offer was undersubcribed.

Additional reporting by Xie Yu