Third Bank Failure in China: Hengfeng

The takeaway: smoke is increasingly revealing fire in China.

SCMP: Unit of China’s sovereign wealth fund takes over Xiao Jianhua-linked HengFeng Bank in third case of nationalisation since May

China’s sovereign wealth fund has taken over HengFeng Bank, a troubled lender linked to fugitive financier Xiao Jianhua, in the third case in as many months of the state exerting its grip over wayward financial institutions.
Central Huijin Investment, a subsidiary of the China Investment Corporation that acts as the Chinese government’s shareholder in the country’s four biggest banks, has emerged as a strategic investor in HengFeng, according to a brief report overnight by Shanghai Securities News, published by state news agency Xinhua.
The investment was a breakthrough in HengFeng’s debt restructuring led by the Shandong provincial government, the state-owned newspaper said, without citing a source or providing financial details. Huijin’s investment would increase HengFeng’s capital adequacy, improve the troubled bank’s management and enhance its operational capability, the paper said.
HengFeng, based in Yantai city, was founded in 1987. It operated 18 branches and 306 sub-branches across the country. It is among more than a dozen city-level and rural lenders that had been put on notice by the authorities for a shake-up, as regulators step up their programme of cleaning up financial malfeasance and profligate lending.

财新: 恒丰银行重组方案获批 山东省与汇金联手注资详情

According to many sources of Caixin reporters, the non-performing assets divested by Evergrowing Bank are over 100 billion yuan, which can release some risk capital “return blood”. According to the 2016 annual report of Evergrowing Bank, the bank's total share capital is 11.194 billion shares, and the net assets per share is 5.6 yuan. The total assets are 1.2 trillion yuan, the loan is 430 billion yuan, and the non-performing rate is 1.78%. The annual report was audited by ShineWing Certified Public Accountants and a standard unqualified audit report was issued. However, the annual report that has been delayed for two years shows that the book data of the above-mentioned disclosure of Evergrowing Bank is seriously untrue.

Caixin: Another Lender Gets State Lifeline

Hengfeng Bank is no stranger to scandal. Two of Hengfeng Bank’s former heads have come under investigation for alleged embezzlement. The bank also failed to disclose its financial reports for two consecutive years through 2018.

Hengfeng Bank had 1.2 trillion yuan in total assets at the end of 2016, according to its annual report that year, the most recent one it released.

Only a month ago, Hengfeng's HQ was moved to the provincial capital. See: Hengfeng Bank Falls Under Regulator Scrutiny, HQ Moved

It has been embroiled in scandal.

Here's a 2017 post that mentions the bank in passing as one of many involved in "fake seals" scandals, where bank employees use fake bank seals to engage in fraudulent or outside regulation lending.
3 Billion Yuan Fake WMP at Beijing Branch of Minsheng Bank

Hengfeng bought some fake bills back in 2016: ICBC 2 Billion Yuan in Fake Electronic Bills

The scheme unraveled when Hengfeng Bank (HFB), a provincial lender in Qingdao that had bought some of the slippery bills, learnt during an internal inspection in early August that the Bank of CTS has not authorized ICBC to issue bills on its behalf. HFB had suspected the bills because the Bank of CTS reported much higher yields than the market price, one of the bank's employees said.