China Bohai Bank sells $4.1b in assets to reduce risk

This sale is executed at a 30% discount to face value.

China Bohai Bank is advancing its derisking strategy with a recent asset sale of $4.06b (RMB28.97b) on 8 November, according to S&P Global Ratings.  

This sale, executed at a 30% discount to face value, follows a similar transaction in March worth $0.79b (RMB5.67b).  

Together, these sales account for 3.7% of the bank's gross loans as of June 2024. Tianjin Jinrong Asset Management Co., a state-owned enterprise, was the buyer.  

The bank's derisking approach also involves slowing asset growth and offloading high-risk holdings, including internet loans. It has reinforced internal controls, particularly in credit approval and risk management, to lower asset quality risk.  

As a result, China Bohai Bank's nonperforming assets (NPA) are projected to decline to 6.3% of total loans by 2026, narrowing the gap with the 5.8% industry average. This marks a substantial improvement from the bank's 11.6% NPA ratio peak in 2022.  

The November sale exceeded prior expectations, closing at $2.90b (RMB20.72b) and lifting the bank’s forecasted risk-adjusted capital ratio by approximately 15 basis points to 5.5% by 2026. Despite these gains, weak profitability continues to weigh on the bank’s capitalization.  

The asset sale reflects strong support from the Tianjin City government, which likely played a key role in coordinating with the local asset management firm to facilitate the transaction.

($1.00 = RMB7.23)