China's Ping An Bank says its overdue loans rise on Baoneng liquidity crunch

People walk past a branch of Ping An Bank, a subsidiary of Ping An Insurance, in Beijing
People walk past a branch of Ping An Bank, a subsidiary of Ping An Insurance, in Beijing, China, August 27, 2020. REUTERS/Thomas Peter

BEIJING, Oct 22 (Reuters) - China's Ping An Bank Co Ltd (000001.SZ) said its "special-mention" and overdue loans increased in the third quarter mainly due to a liquidity crunch at Shenzhen Baoneng, a property and financial services conglomerate.

Ping An Bank's outstanding special-mention loans - debts that could potentially turn sour - rose by 37.3% in the third quarter from the end of 2020, while outstanding loans and interests overdue within 90 days increased 32.5%, according to the bank's earnings report released on Wednesday.

"A major client, which is Baoneng, has led to the increases of the indicators (of special-mention and overdue loans)," Guo Shibang, Vice President of Ping An Bank, told investors and journalists on Thursday.

The bank had been aware of the risks of Baoneng from the beginning of the year and had made provisions to prepare for any default of the loans, which have enough collateral of properties in Shenzhen and Hangzhou, Guo added.

The ultimate risk of Baoneng would be controllable and the quality of the bank's loans in the property sector overall is still good, he said.

Baoneng was famous for launching a hostile, highly leveraged takeover bid in 2015 for what was then the biggest publicly traded developer, China Vanke Co Ltd. The attempt failed after Shenzhen Metro became Venke's biggest shareholder, diluting the holdings of Baoneng.

Guo also said Ping An Bank could collect back all the principal and part of the interest of the loans to HNA Group under its current restructuring plan.

Reporting by Zhang Yan and Ryan Woo; Editing by Lincoln Feast.

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