Bank of Beijing (601169.SH) has recently been served with a Notice of Response to Lawsuit regarding the Kangde Xin case, involving a compensation claim of 4.139 billion yuan. This comes shortly after the bank received a 25 million yuan penalty. Notably, the bank's core Tier 1 capital adequacy ratio has dropped to 8.44%, and its provision coverage ratio has fallen below 200%.
According to the announcement, on December 4, Bank of Beijing received the Notice of Response to Lawsuit from the Suzhou Intermediate People's Court in Jiangsu Province. The lawsuit was filed by Hu Juling and other Kangde Xin investors against Kangde Xin Composite Material Group Co., Ltd. for securities misrepresentation liability disputes.
The announcement stated that there are 40 defendants in the case, with Kangde Xin as the first defendant, and Bank of Beijing and its Xidan branch as the 29th and 30th defendants. The plaintiffs are seeking 4.139 billion yuan in compensation for investment losses caused by false statements, including investment differential losses, stamp duty, and commissions.
Additionally, the plaintiffs requested that all defendants except Kangde Xin bear joint and several liability for the losses. They also demanded that all defendants jointly pay 3 million yuan for litigation-related expenses, including announcement fees, notification fees, lawyer fees, appraisal fees, and calculation assistance fees. All litigation costs are to be borne by the defendants.
Legal experts noted that in joint and several liability cases, each responsible party is equally liable, meaning creditors can demand full or partial compensation from any of them.
Bank of Beijing stated that the case has not yet gone to trial, and no legally effective judgment or ruling has been issued. Preliminary assessments suggest that the lawsuit will not materially impact the bank's normal operations or its current and future profits.
Why is Bank of Beijing a defendant? The Kangde Xin case dates back to January 2019, when Kangde Xin defaulted on 1.5 billion yuan in bonds despite reporting 15 billion yuan in cash reserves, including 12.209 billion yuan deposited at Bank of Beijing's Xidan branch. However, the funds were inaccessible.
Following an investigation by the China Securities Regulatory Commission (CSRC), it was revealed that Kangde Xin had inflated profits by approximately 11.53 billion yuan from 2015 to 2018 through falsified revenues, costs, R&D, and sales expenses. On December 6, 2024, the Suzhou Intermediate Court sentenced Kangde Xin's actual controller, Zhong Yu, to 15 years in prison and a 20.2 million yuan fine for multiple offenses, including fraudulent securities issuance and harming listed company interests.
Around the same time, the court accepted a civil compensation lawsuit filed by Hu Juling and 10 other investors under a "representative litigation" procedure, allowing affected investors to join the case collectively. The registration period for plaintiffs ended on October 9, 2025, with Hu Juling elected as the representative.
Bank of Beijing's involvement in the case stems from its role as the custodian bank for Kangde Xin's funds and the lead underwriter for its bonds (18 Kangde Xin SCP001 and 18 Kangde Xin SCP002). Kangde Xin had previously disclosed that it, along with its parent company Kangde Investment Group, signed an irregular Cash Management Agreement with Bank of Beijing's Xidan branch, leading to commingled funds.
Under the agreement, subsidiary account funds were automatically transferred to the parent company's account, leaving subsidiary balances at zero.
On December 31, 2020, the Beijing CBIRC fined Bank of Beijing 39.4 million yuan for 11 violations, including selling fake financial products and mismanaging key operations. Nineteen individuals were penalized, with three banned from the banking industry for life. Bank of Beijing's Xidan branch was fined 3.5 million yuan for issuing false deposit certificates and other violations.
Year-to-Date Fines Exceed 35 Million Yuan Net Profit Growth Declines for Three Consecutive Years
Before the lawsuit notice, Bank of Beijing had already received a major penalty. On November 28, the People's Bank of China (PBOC) fined the bank 25.27 million yuan for nine violations, including anti-money laundering failures and improper account management. Eleven individuals were fined a total of 865,000 yuan.
So far this year, Bank of Beijing has been fined a cumulative 36.8 million yuan. Meanwhile, its net profit growth has been declining.
From 2022 to 2024 and the first three quarters of 2025, Bank of Beijing's net profit growth rates were 11.40%, 3.49%, 0.81%, and 0.26%, respectively. Revenue growth turned negative (-1.08%) in the first three quarters of 2025.
The bank's net interest margin also declined from 1.76% in 2022 to 1.28% in Q3 2025, while its cost-to-income ratio rose from 26.55% to 28.13% over the same period. In comparison, Jiangsu Bank maintained a higher net interest margin (1.74% in Q3 2025) and a lower cost-to-income ratio (21.50%).
Bank of Beijing's fee and commission income has been shrinking, while investment gains have become a key profit driver. From 2022 to Q3 2025, fee income dropped from 7.07 billion yuan to 3.27 billion yuan, while investment gains rose from 8.46 billion yuan to 9.90 billion yuan.
Asset quality showed slight improvement, with the non-performing loan ratio falling from 1.43% in 2022 to 1.29% in Q3 2025. However, the provision coverage ratio dropped to 195.79%, below the 200% threshold. Jiangsu Bank outperformed with a lower NPL ratio (0.84%) and higher provision coverage (322.62%).
Bank of Beijing's capital adequacy ratios have been declining, with the core Tier 1 ratio falling from 9.54% in 2022 to 8.44% in Q3 2025.
To address growth challenges, the bank has been expanding in the Yangtze River Delta region, which accounted for 11.42% of its H1 2025 revenue, while the Beijing-Tianjin-Hebei region contributed 77.09%.
As of December 10, Bank of Beijing's market capitalization stood at 116.9 billion yuan, lagging behind Jiangsu Bank (190.3 billion yuan) and Ningbo Bank (184.8 billion yuan).
Comments