(Yicai Global) March 20 -- Shares in China Huarong Asset Management plunged as much as 9.3 percent today after the country’s biggest state-owned bad debt manager said that it is expecting to run up losses of CNY27.6 billion (USD4 billion) last year, in the second loss-making year in the past three years.

Huarong’s share price [HKG:2799] closed down 3.5 percent at HKD0.41 (USD0.05) apiece. Earlier in the day it sank to HKD0.39.

Overall, the disappointing performance was due to outbreaks of Covid-19, macroeconomic pressure, the downward spiral of the real estate market and volatility in the capital markets, a company spokesperson said yesterday.

Losses in the first half of 2022 were CNY10.1 billion (USD1.5 billion) more than in the second half, the Beijing-based company said in its 2022 interim report. This was mainly due to a decline in the valuation of its financial assets and a phased reduction in restructuring business income.

The situation improved in the second half after state-owned investment firm CITIC Group became Huarong’s majority shareholder. In March last year the Ministry of Finance injected more capital into CITIC by transferring 3 percent of its equity in Huarong.

This hiked CITIC’s holdings in Huarong to 26.46 percent, more than the 24.76 percent held by the ministry, and making CITIC the biggest shareholder in Huarong, even through the ministry still remains actual controller of the asset manager.

Huarong has actively integrated itself into CITIC’s development plan since March 2022, it said. By achieving the sale and transfer of five financial subsidiaries, including Huarong Consumer Financials and Huarong Securities, the firm’s risk exposure was substantially reduced last year.

In terms of its main business, Huarong recovered more than CNY30 billion (USD4.3 billion) in cash from the disposal of non-performing assets, and the proportion of its revenue from bad debts increased significantly. The company will continue to focus on the disposal of non-performing assets next year.

Earlier this month, Huarong became the fourth-largest shareholder in China Everbright Bank after swapping the lender’s convertible bonds for shares. Analysts believe that this will help Huarong optimize its asset structure, expand its revenue sources and better serve the real economy.

Huarong turned a profit in 2021 reporting a CNY378.5 million (USD56.2 million) gain, according to its financial report for the year. But the year before it ran up losses of CNY102.9 billion after incurring asset impairment losses of CNY107.8 billion (USD15.6 billion).

Editor: Kim Taylor