China Minsheng Banking Corp. shares fell after President Mao Xiaofeng resigned and a magazine reported that he’s being investigated by Chinese authorities.
Minsheng, a lender with a market capitalization bigger than Deutsche Bank AG or Credit Suisse Group AG, slid as much as 10.5 percent in Hong Kong and 6.6 percent in Shanghai on Monday. Those declines were pared to 3.1 percent and 3.2 percent respectively by market close.
Mao stepped down for “personal reasons,” the bank said Saturday, after Caixin reported that authorities took him to assist with an investigation. Mao’s mobile was turned off when called by Bloomberg News on Saturday.
No. 1 shareholder Anbang Insurance Group Co. may see price declines as a buying opportunity, according to analysts at Credit Suisse Group AG who cut their one-year target for the stock by 10 percent, citing uncertainties related to the developments. China International Capital Corp. advised investors to stay away from Minsheng shares until April when the bank is due to re-elect board members.
Any investigation “may be related to China’s anti-corruption campaign” and it may “potentially take a while before investors get full details,” Victor Wang and Steven Zhu, Hong Kong-based analysts at Credit Suisse, wrote in a note. While Minsheng remains a “premium quality bank,” its shares will be weak in the short term, they said.
Minsheng’s stock has declined about 10 percent this year in Hong Kong after surging 42 percent in 2014.
Mao’s resignation comes as President Xi Jinping intensifies a crackdown on graft, which has been described by state media as the harshest since the founding of the People’s Republic of China in October 1949. The campaign has spanned businesses, the military, and officials such as Zhou Yongkang, a former member of the Politburo Standing Committee, and Ling Jihua, who was a top aide of retired president Hu Jintao.
If a link exists, Mao would be the highest-ranking banker embroiled in Xi’s campaign.
Minsheng’s largest shareholders including Anbang said they won’t sell stakes after Mao’s resignation, CICC said in a note on Sunday, citing a briefing of analysts by Minsheng’s management. Mao’s situation has nothing to do with Minsheng’s operations, the lender said.
Billionaire shareholder Shi Yuzhu said on his microblog Monday that he’d oppose the appointment of any unknown candidate as a replacement for Mao, saying that the bank had had leadership problems before Mao’s tenure.
Anbang, the Chinese insurer that agreed in October to purchase New York’s Waldorf Astoria hotel, has been buying the lender’s Shanghai-listed A shares and its Hong Kong-listed H-shares, boosting its holdings to 22.5 percent and 5.2 percent respectively as of Jan. 29.
Minsheng was founded in 1996 by 59 private investors including pig-feed tycoon Liu Yonghao. With a market capitalization of about $48 billion, the lender sits below the likes of Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp.
Billionaire Guo Guangchang disposed of his entire 0.13 percent stake in Minsheng’s A-shares, according to disclosure filings to the Hong Kong stock exchange on Jan. 27.
Chairman Hong Qi has been appointed as Minsheng’s acting president. Mao, who was named president last August, didn’t have any disagreement with the board, the Beijing-based bank said in a statement to the Shanghai Stock Exchange on Saturday.
The Caixin report said Mao was taken away by the Communist Party’s Central Commission for Discipline Inspection and removed as party secretary by the banking regulator.
Mao is a graduate of Harvard University, where he completed a masters degree in public administration in 2000, according to a company profile. Before joining Minsheng in 2002, he had roles with the China Communist Youth League and as an official in Hunan province.
Turning 43 this year, Mao is the youngest president of a listed Chinese bank, according to Caixin. The president of a Chinese lender is the equivalent of a chief executive officer at a U.S. bank.
— With assistance by Jun Luo