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Everyone is selling together, and the prices and valuations are greatly discounted or even fail to sell. These small and medium-sized banks are dragged down and their future refinancing is also affected. However, such shareholders are not the worst. Some bank shareholders, after holding shares, either pledge them for cash or operate in secret to get billions of loans, until the bank is emptied.

Text丨Financial Gossip Girl Author: Deng Biluo Xiaoyaozong

The bank's shares were sold off, but no buyers were found.

Recently, the equity of many banks including Hainan Bank, Guangzhou Rural Commercial Bank, Changsha Bank and others were put up for auction. Most of the shareholders of these banks have fallen into difficulties and had to sell their "cash cow" bank shares.

Everyone is selling together, prices and valuations are greatly discounted or even fail to sell, these small and medium-sized banks are dragged down and their future refinancing is also affected.

However, such shareholders are not the worst. Some bank shareholders pledge their shares to cash out or make secret arrangements to obtain billions of loans, eventually draining the bank.

Banks must also be cautious when facing shareholders whose tricks are more numerous than theirs, so as not to fall into the trap.

1.

/Selling Haima Automobile from Hainan Bank,

Selling 485 units will not save the losses /

Recently, Haima Automobile issued an announcement that its holding subsidiary Haima Finance is preparing to sell off all of its shares in Hainan Bank, accounting for 12% of Hainan Bank's total share capital.

▲Image source: Haima Automobile Announcement

Since Hainan Bank is a non-listed bank, these shares will be sent to national property exchanges such as the Shanghai United Property Exchange for pre-listing.

According to the announcement, Haima Finance and China Railway Investment hold the same proportion of shares, ranking as the third largest shareholder of Hainan Bank:

▲Image source: Hainan Bank 2023 Annual Report

From 2017 to 2023, Haima Automobile has been making losses for five years, with a cumulative loss of more than 7.3 billion yuan, and can only hurry to sell off its bank holdings.

▲Image source: Oriental Fortune Choice, Haima Automobile announcement

Haima Automobile is an old joint venture car manufacturer established in 1988. Its full name is Hainan Mazda. It is as well-known as Geely, Great Wall, and Brilliance.

However, the Mazda brand has never been popular. After Tony Leung Ka Fai described it as "a traffic jam" in the Hong Kong movie "Black Gold" released in 1997, the impression it gave people became even worse, and its sales were not ideal.

That year, Haima Automobile was in debt of 1.28 billion and was on the verge of collapse. At that time, a 31-year-old young man named Jing Zhu stepped forward and became the factory director of Haima Automobile.

After taking over, Jing Zhu found that the biggest problem of Haima Automobile was that it did not have production qualifications, so he tried to find a solution and finally persuaded FAW to take control of Haima Automobile, thus solving the production qualification problem. In 2002, Haima Automobile changed the Mazda 323 model to a name that Chinese people liked, called "Fumeilai", and finally started selling cars.

In 2005, Haima Automobile used the shell company "Qiong Jinpan" which had been delisted at that time in order to raise funds for listing. Qiongjinpan was originally called "Haikou Industrial Construction and Development Corporation" and was listed on the Shenzhen Stock Exchange in 1994. It mainly developed the Jinpan Industrial Zone in Haikou. After the Hainan bubble, Qiongjinpan had many unsold houses. Haima Automobile was considered to be a buyer at the time, so it had hundreds of houses on hand, which also became Haima Automobile's lifeline in the future.

Although Haima's car sales have been mediocre, Haima is still quite forward-looking. It established an electric vehicle division early, obtained new energy production qualifications, and exhibited its first electric car, Haima ME, at the 2009 Guangzhou Auto Show.

The sluggish state continued until 2014, when Haima S5 was launched, riding on the tail of the SUV craze. With high configuration and a price of less than 120,000 yuan, S5 immediately became the sales pillar of Haima. In 2016, the brand's sales exceeded 220,000 units.

However, unexpectedly, 2016 also became the peak of its sales, and it began to decline again, especially in 2017 and 2018, with consecutive losses, a total loss of 2.6 billion, and the stock became *ST Haima. During this period, Haima also signed an OEM agreement with Xiaopeng Motors, but the profit from this OEM work was not much, which was just a drop in the bucket compared to the losses.

Therefore, starting from 2019, Haima Automobile started to save itself, selling hundreds of houses and the assets of two companies.

This sale finally allowed Haima Automobile to turn losses into profits in 2020. But in the following years, it started to lose money again.

In fact, the Hainan Bank shares that are going to be listed in the next two days are not the first time that Haima Automobile plans to sell. In 2021, Haima Finance planned to sell 7% of Hainan Bank’s equity to China Railway Investment for 330 million yuan, but at that time the Hainan Regulatory Bureau of the former China Banking and Insurance Regulatory Commission did not approve it, so forget it.

However, at this critical juncture, bank shares are no longer popular. There are too many banks that have been auctioned during this period. In addition to Hainan Bank, shares of Jiangxi Bank, Meizhou Merchants Bank, Guangzhou Rural Commercial Bank, Changsha Bank, Ningxia Bank, Fushun Bank, Guangdong Huaxing Bank, Zhengzhou Rural Commercial Bank and others are also being sold.

The result is that the bank shares put up for auction have not found buyers for a long time.

These unlisted banks are mainly small and medium-sized banks. If they always fail to be sold, their valuations will further decline. For example, all the shares of Changsha Bank held by Xinhualian Petroleum were listed on the Alibaba judicial auction platform on June 26. This was the first auction, and the starting price was 10% off the market price, totaling about 360 million yuan. In the end, no one bid and it failed. Then it was recently put on the second auction, and the starting price was 10% off the starting price of the first auction, totaling 324 million yuan. If it fails to be sold again, it will have to be discounted further.

Searching for "bank equity" on auction platforms, most of the shares have been unsold. Since the beginning of this year, only a few small and medium-sized banks such as Chengdu Bank and Zhejiang Minsheng Bank have successfully transferred their equity, so Hainan Bank has gone to the property rights exchange instead of auctioning.

In this way, should other shareholders who do not sell their shares adjust the valuation of their holdings? If these small and medium-sized banks want to raise funds to expand their shares or even go public in the future, valuation will be even more difficult.

The shareholders who had problems of their own have caused great harm to the bank.

2.

/28.3 billion debt hole,

Minsheng Bank was badly cheated by its former employers /

In fact, the sale of shares is a minor problem for the bank, as it will not affect its operations for the time being. However, some shareholders have borrowed money from the bank or even mortgaged their shares. If there is a problem, the bank will also suffer.

Recently, Oriental Group issued 17 announcements, including receiving a notice of filing a case by the China Securities Regulatory Commission, forced liquidation of some of the major shareholder's shares, application for reorganization by creditors, and risk warnings of possible delisting due to the stock price being below 1 yuan, etc. Each one shows that the crisis of the Oriental Group has arrived.

Among them, in the announcement of the reorganization application by the creditors, the reason for the application was only for 752,000 yuan. They can't even pay back this amount of money. Is the account really empty?

Behind this case, the bank that suffered the most was China Minsheng Bank. According to the annual report, the loan balance of China Minsheng Bank from Dongfang Group reached 9.599 billion yuan in 2023. Dongfang Group is one of the major shareholders of China Minsheng Bank. Recently, Zhang Hongwei of Dongfang Group was re-elected as the vice chairman of China Minsheng Bank with a high salary of 935,000 yuan.

Oriental Group has a total of four listed companies under its umbrella, including Oriental Holdings, China Minsheng Bank, United Energy Group Co., Ltd., and Jinzhou Port Co., Ltd.

As of the end of the first quarter of 2024, Dongfang Group held 1.28 billion A shares of Minsheng Bank, ranking as the tenth largest shareholder, and 1.268 billion shares held were pledged. However, according to the announcement on June 22, 23 million of these shares were forcibly liquidated by CITIC Securities.

The forced liquidation was because on the evening of June 18, Oriental Group issued an announcement stating that its 1.64 billion yuan deposits in its affiliated company Oriental Financial Company were subject to restrictions on large withdrawals. Oriental Group began to plummet, with three limit downs in four days. The stock price fell below the liquidation line and had to be sold.

A week later, at the shareholders' meeting of Minsheng Bank, Vice President Huang Hongri said, "The related credit situation of Dongfang Group was also disclosed in last year's annual report. The balance of Dongfang Group's loans in our bank was 9.889 billion yuan." However, they are actively promoting risk mitigation. Later, Gao Yingxin, chairman of Minsheng Bank, added that Minsheng Bank's current loans to the "Dongfang Group" have been reduced to more than 7 billion yuan.

Another major shareholder of China Minsheng Bank, the Pan-Ocean Group, borrowed even more money from China Minsheng Bank, amounting to 18.726 billion yuan.

The total amount of execution for Oceanwide Holdings and Oceanwide Group alone is close to 49 billion yuan. Minsheng Bank sued Lu Zhiqiang and Oceanwide early on, but the debt has not been recovered after a year and a half.

In January last year, the Beijing branch of China Minsheng Bank filed a lawsuit against Lu Zhiqiang, Oceanwide Holdings, and two of its subsidiaries on the grounds of a financial contract dispute, involving an amount of more than 7 billion yuan. In May this year, the Beijing branch of China Minsheng Bank filed another lawsuit against Oceanwide Group, Oceanwide Holdings, and several Oceanwide-related companies, as well as Lu Zhiqiang himself, demanding that Oceanwide Group repay the loan principal of 4.266 billion yuan, and ordering the defendant Oceanwide Holdings to repay the loan principal of a total of 1.2 billion yuan, as well as the corresponding interest, penalty interest, and compound interest.

Now, the Oceanwide Group and the Oriental Group have together dug a huge hole of 28.325 billion yuan for Minsheng Bank.

It will probably take Minsheng Bank many years to fill this hole.

3.

/From a net worth of 59.6 billion to bankruptcy,

Shandong's richest man screwed this bank

In addition to real estate shareholders who take big steps and cheat banks, coal bosses who invest will also do the same.

In the 2021 New Fortune 500 Rich List, a man named Wang Qingtao became the richest man in Shandong with a net worth of 59.65 billion yuan, and is known as the "Coking King" in the industry.

But within two years, the Zhongrong Xinda Group under his name was in debt of 48.8 billion yuan and announced that it would enter bankruptcy reorganization procedures.

Wang Qingtao served in the army when he was young. When he was demobilized, he worked in the Zouping Materials Bureau. Within a few years, he started a coal business. He expanded his business and borrowed hundreds of millions of yuan to set up a coking company in Zouping. He built a coke oven with a production capacity of 600,000 tons and transformed into the coking business.

At that time, Shandong encouraged steel mills and coking enterprises to cooperate, merge, reorganize or merge. The province planned to launch two or three large coking groups with an annual capacity of more than 3 million tons.

Wang Qingtao attached great importance to this opportunity. In order to obtain cooperation, he went to Jiangsu to visit the "Steel Tsar" Shen Wenrong more than ten times within three months. Finally, Shen Wenrong decided to invest.

In 2007, Wang Qingtao, together with Jiangsu Shagang Group and Shandong Xinwen Mining, invested 3 billion to establish the largest coal chemical industrial park in Shandong Province. After this cooperation, Wang Qingtao's business road entered the fast lane and he became the "coking king" of Shandong. In 2012, taking advantage of Shandong Province's plan to build an international enterprise, Wang Qingtao promoted the merger and reorganization of Shandong Coking Group in order to further expand.

Unfortunately, the good times did not last long. Soon it was time for supply-side reform and capacity reduction. Both steel and coal industries were shrinking, and coking plants began to lose money.

At this time, Wang Qingtao decided to turn his focus to finance. In an interview, he said: "Why do many physical enterprises want to engage in finance and real estate? Because entrepreneurs don't know the industry cycle, don't know when the industry turning point will come, and don't know when the wind direction will change. They are afraid."

In August 2015, Wang Qingtao established Zhongrong Investment Group Co., Ltd., marking the official start of his "financial holding dream". In December of the same year, Wang Qingtao acquired 14.29% of the shares of Jincheng Bank for 755 million yuan, becoming the bank's largest shareholder.

In March 2016, Wang Qingtao officially changed the name of Shandong Coking Group to Zhongrong Xinda, and began to frantically acquire shares of financial institutions, including Xiamen International Bank, China United Property Insurance, Xiamen Rural Commercial Bank, and HSBC.

In 2018, Wang Qingtao proposed another "small goal": the company will achieve total assets of 400 billion yuan, annual sales revenue of 300 billion yuan, and profits of 30 billion yuan in 2020, and will invest in the top ten banks, insurance companies, securities companies and other financial institutions in the industry, and control more than 10 listed companies.

But where did he get the money for these acquisitions? He borrowed money by pledging his shares, especially the Jincheng Bank, in which he first invested.

Tianyancha shows that in 2015, Shandong Logistics Group, a subsidiary of Zhongrong Xinda, pledged 51 million shares of its subsidiary to Jincheng Bank; in 2016, Zhongrong Xinda pledged 2.5 billion shares of Shandong Logistics Group to Jincheng Bank; at the end of the same year, it pledged its shares in Jincheng Bank to Guangdong Yuecai Trust.

Wang Qingtao once said that “the bank in which we hold equity will not become Zhongrong’s new ATM”, but it turned out that his words were completely refuted.

He not only bought financial institutions, but also bought mines. Zhongrong Xinda spent 5.57 billion to take over the mining plant of Shandong Zibo Hongda. The assessed value of its Peru Banggou Iron Mine reached 10.5 billion US dollars, with a total of 39 mining rights. In those years, it was said that a photo of Wang Qingtao and a certain leader in Peru would be hung in the office building of Zhongrong Xinda, and the industry sighed that Mr. Wang had connections.

Originally, he could have made do with the funds, but Shandong enterprises are loyal and there are many mutual guarantees. For example, Zibo Hongda has a loan of 236 million yuan guaranteed by Zhongrong Xinda, and Rising Group, which ran into financial difficulties in 2018, also has a loan of 400 million yuan guaranteed by Zhongrong Xinda. In July 2018, because Yongtai Group defaulted, many of its related Zhongrong Xinda bonds experienced a flash crash crisis, one of which crashed 72% and was temporarily suspended from trading, which immediately made banks nervous.

In fact, it is not terrible for a company to suffer a small loss or to repay hundreds of millions of dollars for a sister company. The most terrible thing is if the bank is nervous and refuses to lend new money to repay old debts.

By the end of 2020, there were 31 companies outside Zhongrong Xinda Group that were guaranteed with a total amount of approximately 7.5 billion yuan, of which 7 were overdue, and the banks that were collecting debts rushed in.

Wang Qingtao has also thought of ways to save himself. He began to frequently sell off the assets he acquired a few years ago in 2021, but due to the general background of financial deleveraging, small and medium-sized bank equity is not easy to sell. Zhongrong Xinda has also carried out internal measures including stabilizing production, maintaining employment, reducing debt, and attracting strategic investors, hoping to resolve the company's debt crisis.

In the end, the debt risk problem was not resolved.

The circular expansion strategy of "borrowing money - mergers and acquisitions - mortgage - borrowing money" will cause a series of explosions once something goes wrong, which can seriously harm these banks. Even though Jincheng Bank is his "own son" in which he has a stake, it cannot be avoided.

The above-mentioned cases are all bosses of large groups, and they cheated the banks in which they held shares, which is not easy to guard against. However, there was a major case in Hebei Province where a small bank was emptied, which was accomplished by an individual who dared to think and act.

For example, in a case announced in 2019, Jinzhou Hengsheng Rural Bank, which had only been in business for four years, was emptied of 2.6 billion yuan by its major shareholder Zhao Qiang, which became the largest loan fraud case in Hebei. Zhao Qiang only held 5% of the shares on the surface, but secretly found three companies and five natural persons to hold the shares on his behalf, and finally held a total of 60% of the shares. Another shareholder was the sponsor of Hengsheng Rural Bank, Zhejiang Wenzhou Ouhai Rural Commercial Bank, which held 40% of the shares.

It turned out that except for the shareholders who initiated the bank, the remaining shares belonged to Zhao Qiang alone. Afterwards, Zhao Qiang instructed people inside and outside the bank to impersonate others and borrow 2.6 billion from Jinzhou Hengsheng Bank. Some of the money was used for real estate business, and some was used to buy cars and stocks.

In this case, it was a "small shareholder" who held 40% of the shares. Zhejiang Ouhai Rural Commercial Bank found a problem during a compliance inspection. How could someone regularly take a large amount of cash to the same counter window to pay interest on 329 loan accounts? Not to mention compliance, ordinary tellers could see what was going on and followed the clues to find out the loan fraud case.

Zhao Qiang was arrested soon after the incident. The first-instance judgment showed that Zhao Qiang was sentenced to life imprisonment for multiple crimes including loan fraud and loan fraud. 30 people who were dealt with in another case were also sentenced and fined. However, to date, there are still 6,212 loans totaling 1.199 billion yuan that have not been recovered.

It seems that banks have to be careful with their shareholders as well.

References:

"The third largest shareholder plans to sell off its shares! Haima Automobile, which has suffered losses for years, sells off its shares in Hainan Bank again", China Times

"He was the richest man in Shandong last year, but now he can't even pay the interest," Time Weekly