Exclusive: CDB branch chief suspended over Ping An deal

Head of China Development Bank's HK branch sidelined after U-turn on loan support for Thai conglomerate aiming to buy stake in insurer

PUBLISHED : Thursday, 10 January, 2013, 12:00am
UPDATED : Tuesday, 15 January, 2013, 10:42am

The head of China Development Bank's Hong Kong branch has been suspended after a U-turn by the state-owned lender over its proposed involvement in a deal for HSBC's stake in Ping An Insurance.

CDB is understood to have backed off from its plan to provide loan support for a US$9.4 billion bid by a Thai conglomerate for HSBC's holding in the mainland's No 2 life insurer.

Sources close to the situation told the South China Morning Post yesterday that Liu Hao , CDB's Hong Kong branch head, was informed by the lender's Beijing headquarters last week that he had been suspended from his job until further notice.

Liu's suspension was related to the multibillion-dollar loan deal CDB initially agreed with Charoen Pokphand Group (CP) to support the Thai firm's acquisition of HSBC's entire 15.6 per cent stake in Ping An, said the sources, who declined to be identified due to the highly sensitive nature of the matter.

"He has been suspended temporarily, but this doesn't necessarily mean he has a problem," one of the sources said. "It's still too early to say."

Liu, who officially took the Hong Kong position about a year ago, was also advised to return to Beijing quickly and give a full report on the loan arrangements to the top managers of CDB, led by chairman Chen Yuan , son of the late senior Communist Party leader Chen Yun .

In a brief e-mail in response to inquiries by the Post yesterday, Liu said he was "currently working normally in Hong Kong and performing my duties as the branch head of CDB". He declined to comment further.

Liu was the decision-maker at CDB on last month's loan deal with CP, which is known for its food exports but has little experience in the financial industry, the sources said.

Chen was annoyed when he was later informed that the Thai firm might not be the real buyer and ultimate holder of the Ping An stake, which has been held by HSBC for more than a decade, the sources said.

Part of the money CDB initially agreed to lend CP for the Ping An deal came from a pool of cash Beijing wanted CDB to reserve for agriculture-related financing purposes, one of the sources said.

He added that any misuse of agriculture-only loans could result in a breach of banking regulations.

On Tuesday, the Post broke the news that CDB was reconsidering its decision to back CP's bid, a signal the deal was in trouble.

The Post also ran an exclusive report yesterday that the China Insurance Regulatory Commission was poised to reject the deal over concerns about how the deal was funded and the identity of the real buyer. Xiao Jianhua , a secretive mainland businessman, is believed to be the buyer behind the scenes, the Post reported.

Liu's suspension has so far remained an internal matter of which only a few CDB senior executives related to the case are aware, the people the Post spoke to yesterday said. No internal or public statement about the suspension has been made. Liu may resume his job once the case is cleared, the sources said.

From a legal perspective, before any formal application to the China Banking Regulatory Commission (CBRC) for approval of a change in a senior position such as Liu's, the incumbent's title remains unchanged.

CDB opened its Hong Kong branch in 2009. It is an important offshore business platform from which the lender - a policy bank turned commercial bank that is directly under the State Council, China's cabinet - can expand outside the mainland.

Early last month, HSBC surprised the market by saying it would sell its Ping An stake to CP.

HSBC said the deal would be closed in two stages. CP would first pay for about 20 per cent of the shares with its own cash and the remainder would be paid for with a combination of cash and loans sponsored by CDB's Hong Kong branch.

Ping An gained 0.88 per cent in Hong Kong yesterday - as the Hang Seng Index rose 0.46 per cent - after sinking 4 per cent on Tuesday, but its Shanghai shares fell 0.86 per cent as the onshore market dipped 0.03 per cent.

HSBC slipped 0.12 per cent to HK$82.65.