Hankou Bank has been fined several times for irregularities in the management of its loan business
"China Science and Technology Investment", Zhang Ting, He Ziyan
Recently, the Hubei Supervision Bureau of the State Administration of Financial Supervision and Administration issued administrative punishment information, Hankou Bank Co., Ltd. (hereinafter referred to as "Hankou Bank") was fined 4.85 million yuan for 14 violations of laws and regulations; Cheng Zhi, then assistant to the president of Xiangyang Branch, Liang Qibin, deputy general manager of the credit review department of Enshi Branch, and Tan Aimin, general manager of the risk management department of the head office, were warned and punished for failing to perform their duties in the management of loan business; Dong Guoqing, general manager of the business department of the head office, was warned and fined 50,000 yuan.
Most of the violations were related to the loan business, and since last year, many of the fines issued by the bank have been related to loan business violations. Shortly after the former chairman left office, Hankou Bank was caught in the whirlpool of public opinion, and the bank's profit performance and asset quality were not satisfactory, exposing the risk of its continuing operation.
He has been fined many times for loan business
According to the punishment information, Hankou Bank was involved in the following violations, including inadequate credit management and lending by loan-to-deposit pledge; illegal approval and issuance of working capital loans with non-compliant purposes; illegal issuance of loans to real estate enterprises; illegal provision of financing to real estate projects with incomplete four certificates, and part of the funds were used to repay the bank's risky loans; inadequate implementation of the personal loan interview and signature system; failure to perform due diligence in pre-loan investigation and write-off of losses caused by loans; lax examination of accounts receivable and non-performing loans; delaying risk exposure through illegal operations in internal accounts; and repaying loans through loansConcealing the quality of credit assets by means of loan interest collection and interest postponement and deferral, undertaking debts in the form of "shell swapping" to cover up non-performing loans, lax trade background examination, and transferring the negotiation and payment of letters of credit to bank acceptance bills as deposits, false statistics on loans to small and micro enterprises, indirect investment of wealth management funds in the bank's credit assets, and imprudent loan management, resulting in non-performing loans, etc.
Among the reasons for this violation, Hankou Bank issued loans to real estate enterprises in violation of regulations, provided financing to real estate projects with incomplete four certificates in violation of regulations, or illegally flowed funds into restricted areas of real estate. In 2021, the former China Banking and Insurance Regulatory Commission, the Ministry of Housing and Urban-Rural Development, and the People's Bank of China jointly issued the Notice on Preventing Illegal Inflow of Loans for Business Purposes into the Real Estate Sector, stipulating that banks' operating loans cannot flow into the real estate sector, and requiring banks to strengthen the management of loan "term, collateral, and post-loan", as well as strengthen banks' internal control and intermediary management. Last year, a "detailed list of bank loans owed by Evergrande" circulated on the Internet, and Hankou Bank was involved, and a number of related loans may have formed bad debts. At present, it seems that Hankou Bank's compliance and risk control in real estate projects still needs to be strengthened.
Last year, Hankou Bank and its sub-branches received a number of fines, all of which were related to loan business violations, with fines of more than 6 million.
In June last year, the Yichang branch of Hankou Bank was fined 250,000 yuan for issuing entrusted loans with its own funds and assuming substantial risks; in July, Hankou Bank was fined 300,000 yuan for undertaking the bank's defaulted trust through loans to delay risk exposure; in September, Hankou Bank and Guoguohu branch were fined 300,000 yuan for failing to strictly follow the requirements of credit review for customers in other places, inaccurate five-level classification of loans, and delaying risk exposure by undertaking defaulted trusts of the bank through loans. In December, the Chongqing Supervision Bureau of the State Administration of Financial Supervision and Administration released administrative punishment information showing that the Chongqing branch of Hankou Bank was fined 1.9 million yuan for five violations of laws and regulations, including misappropriation of credit funds.
It is worth mentioning that in December last year, Chen Xinmin, the former chairman of the board of directors of Hankou Bank who had been at the helm for 14 years, was finally "double-opened" because he "relied on finance to eat finance" during his tenure, issued loans in violation of regulations, embezzled public funds, and used his position to make profits in loans for others. Henan Dihuida Industrial Co., Ltd. (hereinafter referred to as "Dihuida Company") applied for renewal of the loan and re-applied for credit extension due to the expiration of the loan, and the account manager of Hankou Bank and the downstream purchaser and seller of the borrower were required to sign a tripartite agreement in person, but the then account managers Liu Zhi, Kang and Wang did not sign the "Tripartite Cooperation Agreement on Payment of Payment" with the downstream buyers and sellers of Dihuida Company as required Instead, the above-mentioned agreement was handed over to the personnel of Dihuida Company, and the personnel of Dihuida Company affixed false seals and returned the credit line of 150 million yuan. As early as the establishment of the factory, Dihuida Company was burdened with private debts, and later stopped production due to poor management, so the bank suffered huge losses.
Operations continued to be under pressure
Against the backdrop of successive fines and financial anti-corruption, the negative impact of Hankou Bank continues to this day. At the same time, Hankou Bank's asset quality is not only under pressure, but its profitability is also declining.
In January this year, Hankou Bank announced its 2024 interbank certificate of deposit issuance plan, which disclosed part of its operating results in 2023. At the end of 2023, Hankou Bank's operating income will be 8.549 billion yuan, total profit will be 615 million yuan, and net profit will be 1.445 billion yuan, with year-on-year growth rates of 3.13%, -53.48%, and -24.56% respectively. From 2021 to 2023, Hankou Bank's return on capital will be 4.55%, 6.11%, and 4.45%, respectively, and the return on assets will be 0.27%, 0.39%, and 0.28%, respectively. The Core Indicators of Risk Supervision of Commercial Banks (for Trial Implementation) require that the return on assets of commercial banks should not be less than 0.6% and the return on capital should not be less than 11%, and the profit indicators of Hankou Bank have not met the regulatory requirements for three consecutive years.
In February this year, CCXI's rating report on Hankou Bank showed that due to the relatively high proportion of tax-exempt assets such as government bonds and local government bonds, Hankou Bank's income tax expense has continued to be negative in recent years. At the end of September last year, the balance of financial investment of Hankou Bank increased by 11.73 percent from the beginning of the year to 192.855 billion yuan, of which the total of Chinese bonds, local government bonds and policy financial bonds accounted for 63.09 percent, an increase of 3.43 percentage points from the beginning of the year, corporate bonds accounted for 14.21 percent, and asset management, trust plans and debt financing plans accounted for 3.4 percent. In other words, Hankou Bank's income tax expense has been negative in recent years, which has slowed down the sharp decline in its net profit to a certain extent.
Hankou Bank's asset quality has also continued to decline. As of the end of 2023, Hankou Bank's non-performing loan ratio was 2.64%, down 0.31 percentage points from 2.77% at the end of the third quarter of the previous year, and unchanged from the end of 2022. Even after the pressure reduction, its non-performing loan ratio is still higher than the average non-performing loan ratio of commercial banks of 1.59%.
At the end of 2023, Hankou Bank's provision coverage ratio was 141.34%, below the regulatory red line of 150%. It is worth mentioning that from 2020 to 2022, the provision coverage ratio of Hankou Bank was 136.52%, 135.45%, and 140.63% respectively, and its provision coverage ratio has been below the regulatory red line of 150% for four consecutive years. At the end of 2023, the capital adequacy ratio of Hankou Bank was 12.17%, which was also lower than the average capital adequacy ratio of 15.06% for commercial banks (excluding foreign bank branches) at the end of the fourth quarter of 2023, while the loan-to-deposit ratio of 83.38% exceeded the regulatory requirement of 75%. Amid declining net profit, low provision coverage ratio and low capital adequacy ratio, Hankou Bank's potential non-performing loan risk is being exposed.
It was subject to a "liquidation" transfer of equity
While the overall operation was under pressure, the equity of Hankou Bank was also transferred by a number of shareholders in the form of "liquidation".
On April 25-26 this year, Wuhan Nonferrous Metals Investment Co., Ltd. auctioned 229,500 shares of Hankou Bank held by Jingdong Auction Bankruptcy and Liquidation Platform, with a starting price of 1.026 million yuan, or 4.47 yuan per share.
On December 20, 2023, China Construction Third Engineering Bureau Co., Ltd. (hereinafter referred to as "China Construction Third Engineering Bureau") held 24,649,200 shares of Hankou Bank was listed and transferred on the Beijing Equity Exchange until January 17, 2024, with a reserve price of 125 million yuan. As early as November 21, 2023, China Construction Third Engineering Bureau listed and transferred the equity once, with a reserve price of 139 million yuan. That is to say, the reserve price of the second listing transfer has been discounted by 9% compared with the last reserve price, dropping to 125 million yuan. Due to the end date of information disclosure on April 29 this year, the specific auction of the equity has not yet been seen.
Previously, China Changjiang Power Group Co., Ltd., Hubei Light Holding Wuhan Light Industry Institute Co., Ltd., Zhongji International Engineering Co., Ltd., State Grid Yingda International Holding Group Co., Ltd. and other shareholders respectively listed and transferred 30 million shares, 61,500 shares, 213,000 shares, and 55.35 million shares of Hankou Bank, almost directly "clearing" the equity of Hankou Bank. In addition, the enterprise investigation shows that Hankou Bank has more than 1 billion shares in the pledge state. According to the enterprise early warning communication, 213 million shares of Hankou Bank have been frozen by the judiciary, of which Fuxin Group Co., Ltd., the sixth largest shareholder of Hankou Bank, holds 4.14% of the shares, and its 152 million shares of Hankou Bank have been frozen by the judiciary. It can be seen that at present, the equity of Hankou Bank is still in a relatively unstable stage.
Most of the shareholders who transferred the equity of Hankou Bank were state-owned enterprises, and the purpose of the liquidation, whether it was to focus on the main business due to policy needs or to cut off the loss due to the bank's relatively bleak operating situation, had an adverse impact on the reputation and image of Hankou Bank. Frequent cross-border regulatory red lines, declining profits, and downward pressure on asset quality are all issues that Hankou Bank needs to face squarely, and they are also important factors that cannot be ignored on its IPO journey.
The reporter called and wrote to Hankou Bank about the bank's performance and penalties, but the bank only replied to the reporter on the phone.
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