* Huarong net profit jumped 66 pct in 2012 to 6.96 bln yuan
* Huarong manages over 300 bln yuan of assets
* Huarong's rival Cinda working with advisors for IPO
(Adds details on Cinda deal, Huarong's performance)
By Denny Thomas and Samuel Shen
HONG KONG/SHANGHAI, June 24 China's Huarong
Asset Management Corp plans to raise up to $2 billion by selling
a stake of 15 percent to 20 percent, two sources told Reuters,
becoming the country's second asset management company to offer
a minority stake to outsiders.
Huarong, established in 1999, is the biggest of the four
funds that China's government set up to remove an estimated 1.4
trillion yuan ($230 billion) worth of bad loans from the
country's top four state lenders as they were preparing for
initial public offerings.
Huarong was set up to acquire Industrial and Commercial Bank
of China Ltd's (ICBC) bad assets worth 407.7 billion
yuan. ICBC, which was listed in Hong Kong and Shanghai in 2006,
had accrued the bad assets when the bank made
government-directed loans to 71,000 mostly state-owned firms,
media reports at that time said.
Huarong's planned fund raising comes at a time when the
quality of loans inside China's banking system is under heavy
scrutiny amid a slowing economy. Last week's spike in interbank
lending rates created a cash crunch that sparked worries across
the country's financial system.
Huarong has invited banks to make pitches to win an advisory
role in the sale, and recently appointed one to run the process,
according to one of the sources, who asked not to be named as
the information was not public yet.
Cinda Asset Management Corp, another bad loan vehicle
created by China, raised $1.6 billion last year from investors
including China's National Social Security Fund, Standard
Chartered and UBS.
Cinda has kicked off an IPO process, informally engaging
Bank of America Merrill Lynch, Credit Suisse,
Goldman Sachs and UBS to work on the potential listing,
IFR, a Thomson Reuters publication, reported last week.
Huarong's eventual goal is to turn into a publicly listed
company and the sale of the minority stake is a prelude to an
IPO, sources added.
Beijing set up Huarong, Cinda, Great Wall Asset Management
Corp and Orient Asset Management Corp to buy up nonperforming
loans from its state-owned banks in preparation for the lenders'
China's four AMCs have all transformed into commercially
viable entities after completing their mandates to dispose of
bad debts inherited from the Big Four Banks. That has enabled
them to compete directly with other Chinese brokerages and asset
Huarong was restructured into a joint stock financial
holding group in 2012 with businesses ranging from asset
management, banking, securities, trust, leasing, investment,
funds, futures, and real estate.
It manages over 300 billion yuan of assets, and its net
profit jumped 66 percent in 2012 to 6.96 billion yuan, according
to its annual report. Huarong said it would work with strategic
domestic and foreign investors to achieve a listing both at home
Huarong was not immediately available for comment.
China's Ministry of Finance, which owns 98 percent of
Huarong, plans to sell some of its shares but will keep a
controlling stake in Huarong, Chairman Lai Xiaomin told Reuters
in April. The ministry did not specify the size or timing of the
China Life Insurance Co Ltd , the
world's biggest insurer by market value, owns 1.6 percent of
The asset management companies were backed by bonds issued
by the Chinese government valid for 10 years, during which they
were supposed to sell all the nonperforming loans, but that
timeframe was extended in 2010 for another 10 years.
($1 = 6.1329 Chinese yuan)
(Reporting by Denny Thomas and Samuel Shen; Additional
reporting by Elzio Barreto in Hong Kong; Editing by Michael
Flaherty, John Mair and Ryan Woo)