China Huarong issues profit warning

FILE PHOTO: Logos of China Huarong Asset Management Co are seen during a finance expo in Beijing, in this October 30, 2014 file photo. REUTERS/China Daily/File Photo

BEIJING (Reuters) - China Huarong Asset Management Co 2799.HK, one of China's four state-owned bad loan managers, said in a profit warning on Sunday it expected to report "a prominent decrease" year-on-year in net profit for the first six months of the year.

The expected profit drop was caused by a substantial year-on-year increase in provisions due to credit risk exposure of part of its financial assets and a significant increase in interest expenses due to rising external financing, according to the stock exchange filing.

A decrease in valuations of part of its financial assets, affected by wide capital market fluctuations, also contributed to the expected profit drop, the filing said.

The profit warning comes as Huarong wrestles with a liquidity crunch triggered by an anti-corruption probe into its former chairman Lai Xiaomin in April.

The investigation into Lai makes him the latest in a long line of top Chinese executives coming under fire as China looks to rein in risks in the financial sector, targeting riskier lending practices and high levels of corporate debt.

Huarong hit the headlines earlier this year after building up a 36 percent stake in a key unit of embattled private energy company CEFC China Energy, which is acquiring a $9.1 billion stake in Russia's oil major Rosneft ROSN.MM.

Reporting by Shu Zhang and Xiangjin Zeng; Editing by Mark Potter