Zhao nabs ABC presidency as scandal breaks

Industry veteran Zhao Huan is to take the helm at underperforming Agricultural Bank of China, filling a role left vacant last year in the wake of the government's anti-graft drive, just as a new scandal breaks over the country’s third-largest lender by assets.

The appointment as president of Zhao to replace Zhang Yun, who formally left the bank in December after becoming the focus of a corruption probe, is still to be approved by the China Banking Regulatory Commission, ABC said in a filing with the Shanghai Stock Exchange late on Thursday.

But one of his first tasks could be to deal with the potential fallout following news on Friday of an embezzlement scam involving staff at the bank who allegedly used bank drafts to bet on shares and subsequently lost some of the money.

Caixin, a respected Chinese media outlet, reported that two junior employees at the bank’s Beijing branch were being investigated for allegedly cashing bank acceptance bills and investing some of the proceeds in the stock market. The report, which relied on unidentified sources, said some of the embezzled cash was subsequently not returned due to the losses sustained as Chinese stock markets plunged since last summer.

The bank said in a separate exchange filing later on Friday that the bills involved in the “incident” were worth about Rmb3.92 billion ($596 million) and that it is cooperating with the police investigation to ensure the safety of the funds to the “greatest extent”.

ABC could not be immediately reached for further comment.

Presidents past and present

Zhao, 52, worked for more than a decade at China Construction Bank, the country’s second-largest bank. He served as vice president of CCB from 2011 to 2014 before being assigned to lead Shanghai-listed China Everbright Bank, prior to his appointment at ABC.

“He was a promising rising star at CCB. He knew well what he was doing and was promoted quickly here,” one person in a senior position at CCB told FinanceAsia.

Zhao is taking the helm at ABC at a challenging time in general for Chinese banks in view of the country's economic slowdown, rising bad loans, falling interest margins, and stiffer competition as banking services are liberalised and disrupted by new technology.

ABC saw its profits up barely 0.57% year-on-year in the first three quarters of last year, the slowest pace among China’s so called Big Four state-owned lenders. Its NPL ratio reached 2.02% as of the end of September compared with around 1.45% for the three other banks.

Zhao’s predecessor Zhang, who also served as vice chairman and deputy Communist party chief at ABC, was detained in November as part of an investigation, making him the most senior banking official ensnared in President Xi Jinping’s broad anti-graft campaign, according to domestic media reports.

Caixin reported at the time that Zhang was demoted from his party rank and placed under two years’ probation in October due to investigations over a series of corruption cases.

The bank announced his resignation in December, citing “personal reasons”. Zhang had worked at ABC for more than three decades and had held the top positions since 2009.

The resignation of the 56-year-old career banker came as Xi expanded his anti-graft drive into the country’s financial industry last year. A number of high-ranking regulators and executives at big brokers have since also come under scrutiny.

In September, Citic Securities president Cheng Boming, along with other executives at the country’s largest brokerage, was taken away by police for alleged insider trading and for leaking inside information.