China’s state-owned distressed debt managers China Huarong and China Cinda posted muted earnings for 1H 2022 on rising credit impairments and the crisis in the real estate sector. Huarong reported a loss of RMB 18.9bn ($2.7bn) vs. a profit of RMB 158.3mn ($22.9mn) in the previous year due to impairment charges that more than tripled in a year. This was on expected lines after it sounded a loss warning earlier this month. China Cinda’s profit declined 33% to $4.5bn ($652mn) as impairment losses jumped 85%. Last week, another bad-debt asset manager China Great Wall Asset Management, posted a loss of RMB 8.6bn ($1.2bn) for 2021 as against a profit of RMB 2.1bn ($300mn) in 2020. The company postponed its results release deadline twice due to worsening asset quality and fair value losses. Bloomberg notes that the property sector accounts for about 44% and 46% of acquisition and restructuring businesses at China Cinda and Huarong respectively. Cinda said in a statement, “Real estate enterprises present significant credit risks, and some local governments are faced with severe debt risks. The distressed entities and distressed assets will increase”. Beijing is considering state-owned China Everbright Group to acquire Great Wall AMC and looking at merging China Orient AMC and China Cinda AMC. The objective here would be to have Orient-Cinda as the only national bad-debt manager to deal with distressed assets. Meanwhile, the focus on Huarong and Great Wall would be towards managing NPLs of their parent companies China Citic and China Everbright.
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