Great Wall Asset Management Gets $1.79 Billion Investment
By Wu Xiaomeng and Bonnie Cao
China's Great Wall is one of four national asset management companies created in 1999 to take over bad loans from state banks. Photo: VCG
China's Great Wall Asset Management Co. Ltd. will receive a capital injection of 12.121 billion yuan ($1.79 billion) from four strategic investors as the company prepares for future share sales, Great Wall said Thursday.
China's National Social Security Fund, which manages investment for the country's pension fund, will inject 7 billion yuan into Great Wall, according to company President Zhou Liyao. Other investors are two subsidiaries of China Reinsurance Group —China Property & Casualty Reinsurance Co. with 2.8 billion yuan and China Continent Property & Casualty Insurance Co. with 2.2 billion yuan. And existing shareholder China Life Insurance Co. will invest 121 million yuan.
The investment is subject to regulatory approval, Zhou said at a press conference in Beijing.
"The fundraising is mainly for capital replenishment and to support our next business development," Zhou said. The company is actively seeking opportunities for an initial public offering by closely watching capital markets at home and abroad, Zhou said, according to China Securities Journal.
Great Wall is one of four national asset management companies (AMCs) that China created almost two decades ago to help cushion the impact of the Asian financial crisis by taking bad loans off the books of China's largest banks. The AMCs can recover as much money as possible from assets by selling or restructuring them or by applying other workout methods.
The four national AMCs have expanded quickly into a wider range of financial businesses. Two of them — China Huarong Asset Management Co. Ltd. and China Cinda Asset Management Co. Ltd. — have listed in Hong Kong, while Great Wall and China Orient Asset Management Co. Ltd. have remained unlisted.
Chinese regulators last year ordered AMCs to set capital adequacy ratios of no lower than 12.5% and raised the capital requirements for affiliated nonfinancial institutions. The standard is stricter than for commercial banks. It also asked the four major AMCs to focus on the disposal of nonperforming assets. The stricter requirements have forced AMCs to seek capital injections.
China Orient in February brought four investors on board for 18.04 billion yuan, including the National Social Security Fund, China Telecom, China Guoxin Capital Co. and Shanghai Electric Group. The fundraising boosted the company's capital adequacy ratio to 14.3%.
Great Wall didn't disclose how the capital injection would affect its capital adequacy ratio. In January, the company said its capital adequacy ratio was 12.55% at the end of 2017. Zhou did say that this year Great Wall plans to purchase nonperforming assets of 120 billion yuan and dispose of 100 billion yuan of nonperforming assets.
The company acquired 100.6 billion yuan of nonperforming assets including 76.1 billion yuan of financial nonperforming assets in the first half of this year, according to its data. Nonperforming loan business assets accounted for 60.12% of total assets at the end of June, an increase of 5.9 percentage points from the beginning of the year, it said.
The country's slowing economic growth will drive down the prices of nonperforming assets, while the difficulty of selling assets will rise, said Lei Hongzhang, general manager of Great Wall's asset management department.
The nonperforming loan ratio at Chinese commercial banks rose to 1.9% in May, 0.15 percentage point higher than at the end of the first quarter, according to data from the China Banking Regulatory Commission. Commercial banks' outstanding nonperforming loans totaled 1.9 trillion yuan, the data showed.
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