(Yicai Global) April 2 -- Shares in Bank of Gansu dived by more than 40 percent yesterday because major shareholders had to sell pledged shares in order to meet their own financial obligations, according to the Chinese lender.

Several shareholders had used their stocks as collateral to raise money, the firm said in a statement yesterday without naming the sellers.

Its share price [HKG:2139] closed nearly 43.5 percent lower at HKD0.65 (less than 1 US cent) yesterday, giving it a price-to-book ratio of 0.24 after investors traded HKD80.4 million (USD10.4 million) worth of shares, compared with HKD2.2 million and HKD57,000 (USD7,350) the two previous trading days.

The stock hit a 13.85 percent spike this morning but had waned to HKD0.69, a 6.15 percent gain, when the Hong Kong bourse closed for lunch.

Some seven companies hold at least 5 percent of Bank of Gansu's listed shares, according to its 2019 interim report: Huaxun International Group, China Foreign Economy and Trade Trust, Harvest Ahead International Holdings, Anar Group, China Create Capital, Hong Kong Ruijia trading, and Huarong Rongde Hong Kong Investment Management. Huaxun is the largest shareholder with a more than 16.6 percent stake.

Net profit nearly halved annually to CNY509 million (USD71.7 million) last year as revenue slumped 18.5 percent to CNY7.2 billion (USD1 billion), according to its 2019 financial results published March 30.

It put the drop in revenue down to restructuring, intensifying competition and rising financing costs, while said profits fell because of poor-quality assets and losses from credit impairment. It had CNY335 billion worth of assets as of Dec. 31, up 2 percent from a year earlier, but its capital adequacy ratio fell 1.72 points to 11.83 percent.

The bank hopes to issue another 5 billion stocks in a private placement to supplement its tier-one capital and protect against risk, according to a report from the Securities Times.

Editor: James Boynton