Seven-fold starting price with no bidders! Huatong Bank's 2.77% stake fails to sell, multiple shareholders face debt risks

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

According to JD Asset Trading Platform, as of 10 a.m. on March 17, the equity held by Fujian Xintong Investment Group Co., Ltd. (hereinafter “Xintong Group”) in Huadong Bank was auctioned for one day but ultimately went unsold due to no bidders. The starting price was 42.182 million yuan, with an appraisal value of 60.26 million yuan. Even at a 30% discount, no “white knight” stepped forward.

“These auctioned stakes in Huadong Bank, as well as most stakes in private banks previously auctioned, are small minority holdings, generally below 5%. They do not significantly influence bank management decisions or board seats, and lack control premium. For investors, such stakes neither provide stable dividends nor enable industry synergy or capital operations, so naturally no one wants to take them on,” said a securities analyst specializing in banking to JiJie News. Moreover, regulators have high requirements for bank shareholders’ qualifications.

Xintong Group has deep ties with Huadong Bank. As the first private bank in Fujian Province, Huadong Bank was established in January 2017, initiated by eight Fujian-based private enterprises 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 holdings began to change 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 holdings transferred to other shareholders such as Yonghui Superstores, Fujian Panpan Biotechnology, Sankeshu Coatings, and Fujian Shengnong Food. 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 the group’s status 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 failed, subsequent auctions are usually conducted at a discounted price.

In addition to Xintong Group, several other Huadong Bank shareholders have debt issues. Tianyancha data 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 subject to 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 issues including inadequate shareholding management and insufficient 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. Regarding 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 stakes has become commonplace. Over the past two years, several large private bank stakes in China have failed to sell at auction. 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 the strategic planning department of a city commercial bank told JiJie News that in recent years, some small and medium-sized banks 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 stakes 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 unlisted bank equity.