Citic Group’s liquidity ‘sufficient’ for Huarong Financial buyout

By 2023, cash in hand of $3.7b was enough to cover the acquisition.

Citic Group’s liquidity strength to fund its acquisition of China Huarong Financial Leasing (HRFL) is adequate, supported by its diversified businesses, according to S&P Global Ratings.

The group's capital management plans, aimed at growth and policy goals, should maintain a liquidity buffer post-transaction. 

By the end of 2023, the holding company had $3.7b (RMB27b) in cash and dividends, enough to cover the HRFL acquisition and other financing needs.

On 28 May 2024, Citic Group announced a $1.7b (RMB12b) acquisition of a 60% stake in HRFL from China Citic Financial Asset Management (Citic Financial AMC). 

In November 2023, Citic Group received $13.6b (HK$13.63b) from transferring a 5.01% stake in Citic Ltd. to Citic Financial AMC.

The acquisition is expected to have a limited impact on Citic Group's creditworthiness. 

Citic Group is likely to consolidate HRFL after the acquisition, given its controlling interests. Despite HRFL's weaker credit profile, it represented less than 2% of Citic Group's assets and equity as of the end of 2023.

Government support for Citic Financial AMC is expected to remain high, aiding the distressed asset manager's capital strength. 

The Chinese government fully owns Citic Group. Citic Financial AMC's capital position is anticipated to remain weak over the next two years due to earnings strain, despite expecting a $0.9b (RMB6.3b) capital boost from the HRFL stake disposal.

($1.00 = RMB7.25 = HK$7.81)