A major Chinese state bank said yesterday two foreign buyers paid a total of 1.4 billion yuan (US$171 million) for assets from delinquent borrowers in the biggest auction of its kind to clear away nonperforming loans.
The sale by China Construction Bank comes as China tries to improve state banks' financial health in preparation for opening the industry to foreign competitors. It set a precedent for other banks trying to turn office buildings and other collateral into cash.
China Construction Bank is one of China's four main state-owned commercial banks, which are trying to clear billions of yuan in unpaid loans, many to state industry.
Morgan Stanley and Deutsche Bank paid about 34 percent of the face value for the assets, said the Chinese bank's financial adviser, Ernst & Young. They included a 31-story office tower and a 42,300m2 commercial building.
"We are pleased to have pioneered this effort to bring foreign capital and expertise to the market and our organization," the Construction Bank said in a statement.
The sale marked the first time a Chinese bank has sold assets that backed loans. In other auctions, buyers have received the right to try to collect from borrowers.
Regulators say nonperforming loans total 2 trillion yuan (US$250 billion), while foreign estimates are much higher.
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