Starting at 30% discount with no bids accepted! Huatong Bank's 2.77% equity stake withdrawn from auction, multiple shareholders facing debt risks

Interface News Reporter | Zeng Lingjun

Despite over 15,000 spectators and a starting price that was 30% below the appraisal value, a multi-million dollar equity stake in Fujian Huadong Bank Co., Ltd. (hereinafter referred to as “Huadong Bank”) still failed to sell at auction.

JD Asset Trading Platform shows that by 10 a.m. on March 17, after one day of auction, the equity held by Fujian Xintong Investment Group Co., Ltd. (hereinafter “Xintong Group”) in Huadong Bank was withdrawn due to no bidders. The starting price was 42.182 million yuan, with an appraisal value of 60.26 million yuan, but even at 70% of the appraisal, no one took the deal.

“These auctioned shares of Huadong Bank, as well as most private bank shares previously auctioned, are small in proportion, generally below 5%. They cannot influence bank management decisions or board seats, and lack control premium. For investors, such shares do not provide stable dividends nor industry synergy or capital operations, so naturally no one wants to take them on,” said a securities industry analyst to Jiemian News. Moreover, regulators have high requirements for bank shareholders’ qualifications.

Xintong Group has a deep connection with Huadong Bank. As Fujian Province’s first private bank, Huadong Bank was established in January 2017, initiated by eight private enterprises from Fujian, including Yonghui Superstores Co., Ltd. and Sunshine Holdings Limited.

At that time, Xintong Group was one of the founders, holding an 8.85% stake and ranking as the fourth-largest shareholder with a board seat. However, the good times did not last. As Xintong Group faced its own liquidity issues, its bank shares began to fluctuate frequently.

The turning point came in 2023. According to Huadong Bank’s 2023 financial report, Xintong Group’s shareholding sharply declined, with most of its shares transferred to Yonghui Superstores, Fujian Panpan Biotechnology, Sankeshu Coatings, and Fujian Shengnong Food, among other shareholders. After this adjustment, Xintong Group’s stake dropped from 8.85% to 2.77%, falling from the fourth to the eighth largest shareholder.

The 66.5 million shares now up for auction are the remaining holdings of Xintong Group. These shares are currently pledged, and due to Xintong Group being listed as a person subject to enforcement, they are subject to judicial disposal by the Chaoyang District People’s Court in Beijing. Although the first auction was unsuccessful, subsequent auctions are usually at a discounted price according to judicial procedures.

Besides Xintong Group, several other Huadong Bank shareholders have debt issues. Tianyancha shows that the bank’s second-largest shareholder, Sunshine Holdings Limited, is a dishonest person subject to enforcement; the sixth-largest shareholder, Fujian Sansheng Real Estate Development Co., Ltd., is also under enforcement. Currently, all shares held by Sunshine Holdings are frozen, and the 7% stake held by Fujian Sansheng Real Estate is also frozen.

In April 2023, Huadong Bank was fined 1 million yuan by the former Fujian Banking and Insurance Regulatory Bureau for violations including poor share management and inadequate pre-loan investigation of liquidity loans.

According to Huadong Bank’s 2024 annual report, the bank achieved operating income of 750 million yuan, a 3.6% increase; net profit of 84 million yuan, up 13.2%; and total assets of approximately 36.75 billion yuan, ranking fourth from the bottom among 19 private banks. In terms of asset quality, as of the end of 2024, the non-performing loan ratio was 1.21%, with a provision coverage ratio of 211.22%. While within a reasonable range, it still lags behind other excellent private banks in the industry.

In fact, the auction failure of private bank shares has become routine. Over the past two years, several large private bank equity stakes in China have faced auction failures. For example, in December 2024, the 17.6% stake in Meizhou Ke Shang Bank held by Guangdong Chao Hua Technology was auctioned three times, with an appraisal value of 418 million yuan, repeatedly starting at a discounted price, but all failed due to no bids.

A person from a strategic planning department of a city commercial bank told Jiemian News that in recent years, some small and private banks have experienced asset quality deterioration, shareholder violations of funds, governance chaos, and other issues. Coupled with stricter risk control in the financial industry, investors’ risk appetite for private bank equity has significantly decreased. Even if the assets are free of obvious flaws, they prefer to hold cash and wait, avoiding involvement in illiquid, hard-to-exit assets like non-listed bank shares.