China Huarong Asset Management, the country’s largest distressed debt investor, has issued a profit warning on surging credit impairments and property market jitters less than a year after a $6.6 billion state-led restructuring, reports the Financial Times. Credit impairment losses “increased significantly” in the first six months of the year, Huarong said in a filing late on Tuesday, as it warned of a net loss of RMB 18.9 million ($2.8 million) for the first half of 2022.
The company attributed the loss to the “impact of volatility in the capital market and downturn in the real estate market”, adding that the recurrence of COVID-19 cases, geopolitical conflicts and pressure on the economy were also to blame. Huarong, one of China’s “Big Four” asset management companies, needed a government-orchestrated bailout last year after delaying disclosure of a $16 billion loss for months.
The company now counts state-owned investment company Citic Group as its largest shareholder and is divesting its non-core business units including banks, brokerage, trust and consumer finance entities as regulators urge big AMCs to streamline their operations to reduce financial risk.