(Yicai) May 29 -- China Citic Financial Asset Management, one of the country’s big four bad debt managers, plans to sell most of the equity in its financial leasing unit to its main shareholder for CNY12 billion (USD1.7 billion), as the firm pushes on with downsizing.

Citic Financial will sell 60 percent of China Huarong Financial Leasing to Citic Group, the Beijing-based firm said yesterday. The company’s stake will fall to less than 20 percent, so the unit will no longer be included in its financial statements.

The proceeds of the stake sale will be used to replenish Citic Financial’s core capital and support its main business of managing non-performing assets. 

Citic Financial used to be known as China Huarong Asset Management before being renamed in January. The firm suffered a CNY103 billion loss (USD14.2 billion) in 2020 due to excessive expansion, causing it to become insolvent. 

In 2021, five state-owned financial institutions injected CNY42 billion into the business, becoming its new shareholders. Citic took a more than 26 percent stake.

Since the reorganization, Citic Financial has been disposing of assets that are not relevant to its core business to recoup funds. It has already sold Huarong Zhongguancun Non-performing Assets Trading Center, Huarong Consumer Finance, Huarong Securities, Huarong Xiangjiang Bank, and Huarong Trust. 

Its net loss was CNY27.6 billion in 2022, but the firm turned the corner last year with a net profit of CNY1.8 billion (USD248.3 million). Revenue doubled to CNY75.8 billion, according to its annual earnings report published this March. 

Citic Financial’s shares [HKG: 2799] fell 1.3 percent to close at 38 Hong Kong cents (5 US cents) in Hong Kong today. The benchmark Hang Seng Index lost 1.8 percent.

Editors: Dou Shicong, Tom Litting