This will not be a surprise to regular readers. Banking Day reports:
One of ANZ's early investments in China looks stranded, with the bank announcing yesterday that it will not support a capital raising for Bank of Tianjin. The decision means the bank's stake in Bank of Tianjin will fall to 17.6 per cent from 20 per cent, ANZ said. ANZ will instead "prioritise further investment to support the growth" of its locally-incorporated subsidiary, ANZ said in a statement.
In November 2010, Bank of Tianjin announced plans to issues new shares worth four billion renminbi. ANZ said at the time that it would maintain its stake (which dates from 2005) with its one-fifth share of the capital raising, worth 832 million renminbi, or A$126 million at the time. The capital raising is the prelude to an initial public offer of the bank, though there is now no clear timetable for that to take place.
In the 17 months since BOT announced its plans to sell new shares, the municipal government of Tianjin (which is the major shareholder) has tried to sell its stake. In late 2011 China Great Wall Asset Management Corp (a state-owned fund manager) reached agreement to buy a 50 per cent stake, though this is yet to occur.
Aspects of Bank of Tianjin's risk management practices have become the subject of discussion this year, with several highlighted in an analysis published this week by the Chinese-language monthly Investor Journal.
One is the bank's loan concentration ratio. The 10 largest loans accounted for 53.3 per cent of all loans at the end of 2011, according to the publication. This is down from 65.4 per cent in 2009 and 59.8 per cent in 2010, but still higher than the regulatory 50 per cent level.
Another is the bank's liability strategy. Early this year the bank launched a new product featuring an interest rate of 8.1 per cent that was well above market norms. The financial regulator forced the bank to drop the high-yield deposit three days later.
The theft of 20 million renminbi by an employee in late 2011 also raised questions over risk controls at Bank of Tianjin.
KPMG, in a survey of China's banking sector last year, ranked Bank of Tianjin as the 33rd largest in the country, though at the lower end of industry profitability.
On its website, Bank of Tianjin said it reported a net profit of 2.13 billion renminbi (A$326 million) in 2011, a rise of 11 per cent on the 2010 profit.
The bank's return on assets fell to 0.91 per cent in 2011 from 0.98 per cent in 2010.
The bank put its impaired loan ratio in 2011 at 0.93 per cent. No corresponding data was available to KPMG when it compiled its 2010 survey of the bank sector.
