Bulletin: China Huarong's High Impairment Costs To Strain Capitalization

HONG KONG (S&P Global Ratings) Aug. 22, 2023--China Huarong Asset Management Co. Ltd.'s impairment costs will stay high over the next two years, further weakening its profitability and leverage ratio. China's uneven economic recovery, and particularly risks from the property sector, could continue to weigh on the quality of the company's assets. An earnings recovery for the China-based manager of distressed assets will therefore take time. On Aug. 17, 2023, China Huarong (BBB-/Stable/A-3) warned that its net loss attributable to equity holders of the company would range from approximately Chinese renminbi (RMB) 4.6 billion to RMB5.0 billion for the first half of 2023. This compares with a net loss of RMB18.9 billion for the first half of 2022. China Huarong's

...August 21, 2023 HONG KONG (S&P Global Ratings) Aug. 22, 2023--China Huarong Asset Management Co. Ltd.'s impairment costs will stay high over the next two years, further weakening its profitability and leverage ratio. China's uneven economic recovery, and particularly risks from the property sector, could continue to weigh on the quality of the company's assets. An earnings recovery for the China-based manager of distressed assets will therefore take time. On Aug. 17, 2023, China Huarong (###-/Stable/A-3) warned that its net loss attributable to equity holders of the company would range from approximately Chinese renminbi (RMB) 4.6 billion to RMB5.0 billion for the first half of 2023. This compares with a net loss of RMB18.9 billion for the first half of 2022. China Huarong's poor earnings capacity means its financial leverage will remain weak over the next two years, and exceed our leverage threshold of 12x. China Huarong should be able to meet regulatory capital requirements with a reasonable...

Bulletin