Mar 19, 2023
Huarong Warns of $4 Billion Net Loss in 2022, Citing Volatility
(Bloomberg) -- Shares of China Huarong Asset Management Co. plunged Monday after the bad-debt manager forecast a massive loss for last year.
The Beijing-based company expected a net loss of about 27.6 billion yuan ($4 billion) for 2022, according to a statement to the Hong Kong exchange Sunday, attributing the shortfall to factors including volatility in the capital market that led to declines in the value of some assets.
Shares of Huarong tumbled as much as 9.3% in Hong Kong in early trading on Monday, heading for the lowest close since the end of December. Huarong’s dollar bonds were indicated slightly lower during Monday morning trade after the profit warning. As of 10:38 a.m. Hong Kong time, it’s subordinated perpetual bond is 0.9 cent lower at 84 cents on the dollar.
Other reasons for the estimated losses included adverse macroeconomic situation and a downturn in the domestic real estate industry, which resulted in increased provisions for credit impairment losses, according to the statement.
The company roiled Asian credit markets in 2021 as it failed to release its annual report on time, eventually revealing a massive loss for 2020. It later received a $6.6 billion government-orchestrated bailout.
In a press release Sunday, Huarong said it would continue to slim its business and focus on its core operations of bad debt management. Huarong took over 30.6 billion yuan worth of bad loans from smaller banks in 2022.
The forecast loss for 2022 compares with a profit of 370 million yuan a year earlier. In the second half of 2022, Huarong saw a “positive momentum” in its businesses compared to the first six months, trimming its losses by around 10.1 billion yuan, Huarong said.
China suspended the operations of Deloitte Touche Tohmatsu Ltd.’s Beijing office for three months and imposed an unprecedented fine on the firm over lapses in its auditing work of Huarong from 2014 to 2019. It also fined Huarong itself and seven of its subsidiaries.
Read More: Deloitte Hit by Record China Fine, Suspension Over Huarong
--With assistance from Lorretta Chen.
(Updates with market reaction and its news release.)
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