Citigroup planning bad loans purchase By Chang Tianle (China Daily) Updated: 2004-04-28 08:03
Citigroup, the world's largest financial group, yesterday agreed to
buy 2 billion yuan (US$242 million) worth of non-performing loans (NPLs) from
Great Wall Asset Management Corporation.
Great Wall was established to resolve NPLs from the Agriculture Bank of China
(ABC), one of China's big four State-owned banks.
The 2 billion yuan package involves more than 600 borrowers in Guangdong
Province, a booming economic region in southern China. They are from various
industries including agriculture, real estate, machinery, trades, building
materials and food processing, Citigroup said in a statement.
The terms still remain subject to government approval.
Citigroup anticipates resolution of the portfolio through its global asset
servicing company, Umbrella Asset Finance Limited and with the support of Great
Wall, the statement said.
Heavy NPLs are now a great concern for China's banking industry, as the
sector is set to open by 2007 according to terms in its World Trade Organization
pact.
ABC, together with the Industrial and Commercial Bank of China, China
Construction Bank and the Bank of China are the country's big four
State-owned-banks, which dominate the domestic banking industry with an
estimated 60 to 70 per cent share.
The average NPL ratio of the big four fell 5.85 percentage points last year
to 20.36 per cent, according to the China Banking Regulatory Commission.
In 1999, four asset management companies (AMCs) including Great Wall were set
up to help resolve the NPLs with the big four.
A total of 1.4 trillion yuan (US$168 billion) worth of NPLs have been
transferred into the four AMCs, which are expected to dispose of these NPL
portfolios by 2009. But the disposal of the bad assets has remained slow since
then.
