HONG KONG (Reuters) - Deutsche Bank, Goldman Sachs (GS.N) and Morgan Stanley have held talks with China’s Huarong Asset Management Corp to invest in its $1.5 billion stake sale ahead of the company’s expected initial public offering next year, the Financial Times reported.
The interest of foreign banks in Huarong comes amid looming concerns of a surge in bad loans across China. A spike in non-performing loans would increase the demand for the services of China’s asset management companies.
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.
Setting up these asset management companies allowed China’s top four banks to shed their bad loans book and to list shares publicly, beginning roughly eight years ago.
Huarong plans to raise up to $2 billion by selling a stake of 15-20 percent, Reuters reported in June. The fund raising would set the table for an IPO, in a move similar to what Cinda Asset Management Corp, another bad loan vehicle created by China, is doing.
The FT, citing people close to the Huarong process, said in its report on Friday that the company would pursue a Hong Kong listing.
Huarong 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.
Cinda raised $1.6 billion last year from investors including China’s National Social Security Fund, Standard Chartered (STAN.L) and UBS UBSN.VX. It has also started working on its IPO process.
Reporting by Denny Thomas; Editing by Michael Flaherty and Himani Sarkar