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China Construction Bank (CCB), together with China Cinda Asset Management Corp, will hold an auction week from October 28 to November 3 to sell 8 billion yuan (US$963 million) worth of assets with debts against them.
It will be the first time in the country for a State-owned commercial bank to join hands with an asset management company to deal with bad assets, a bank spokesman said.
Some bad assets, including purchased entities which firms do not have the cash to pay for, such as cars and pieces of real estate, will be sold to domestic and foreign investors during the auction week, the spokesman said.
In June, China Construction Bank, a State-owned firm, launched its first such auction, to sell off 4 billion yuan (US$481 million) of mortgaged assets.
Huang Jinlao, a senior researcher with the International Financial Research Institute under the Bank of China, said: "The further action to be taken by China Construction Bank suggests that the bank is speeding up disposal of its non-performing assets."
The bank, which handed over 250 billion yuan (US$30.1 billion) worth of non-performing assets to China Cinda Asset Management Corp in 1999, still held about 260 billion yuan (US$31.3 billion) worth of non-performing assets at the end of June this year.
By the end of June, the bank's non-performing loans (NPLs), according to the international standard category-5 classification (one of the five internationally recognized classes of assets), had fallen 14.6 billion yuan (US$1.8 billion), or 2.06 percentage points, to 17.29 percent of its total assets.
"If we don't speed up disposal of non-performing assets, it will hold back the bank's listing," said Yang Xiaoyang, general manager of the bank's Special Asset Resolution Department.
President Zhang Enzhao of the bank said China Construction Bank intends to be the country's first domestically listed State-owned bank.
Zhang earlier unveiled a timetable for the listing plan. "The listing of the financial giant will mark the beginning of the gradual break-up of the bank into a number of specialized units. It will be done through a number of flotations over the next four to five years, with parts of the bank's assets being listed on the market.
"Following a successful restructuring, other assets will be gradually transferred to the listed arms as part of the move to realize a final complete listing of all sections of the bank.
"Our final goal is to establish a modern commercial bank with good corporate governance and sound performance that is a competitive heavyweight in the global financial market," Zhang said.
To achieve the listing goal, the bank will have to drop the NPL ratio by 2 to 3 percentage points a year over the coming three to five years, Zhang said.
By 2005, the NPL ratio should be less than 10 percent, he said.
Niu Li, a senior economist with the State Information Center, said domestic banks are facing increasing pressure, as more foreign banks are coming to China now that the country has become a member of the World Trade Organization.
(China Daily September 19, 2002)
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