UPDATE 1-Unit of China's state-owned ICBC to take 10.82% stake in Bank of Jinzhou

(Adds comment, detail, background)

BEIJING, July 28 (Reuters) – The Industrial and Commercial Bank of China (ICBC), , the country’s largest lender by assets, said on Sunday that one of its unit had signed an equity transfer agreement to invest in the troubled Bank of Jinzhou.

The state-owned bank’s unit, ICBC Financial Asset Investment Co, will invest up to 3 billion yuan ($436 million) in a 10.82% stake of Bank of Jinzhou, the ICBC said in a statement filed to the Shanghai Stock Exchange.

The investment appeared to be the latest state-led bid to support a highly indebted smaller banks to contain financial risks.

“The investment is to serve country’s supply-side reform in the financial sector, and enhance the bank’s capability to serve the real economy,” the ICBC said in its statement.

The deal will be conducted with the unit’s own funds, ICBC added.

In May, a shock government-led takeover of little-known Baoshang Bank revived concern about the health of hundreds of small lenders as the slowing economy results in more sour loans, testing their capital buffers and draining their reserves.

Concern has been growing about Bank of Jinzhou since the Hong Kong-listed lender suspended trading in its shares this year in Hong Kong and saw its auditor quit.

On Thursday, Bank of Jinzhou said it was in talks with multiple parties for possible investments.

Sources told Reuters a day earlier that regulators recently met financial institutions to discuss measures to deal with liquidity problems at the bank. ($1 = 6.8785 Chinese yuan renminbi) (Reporting by Cheng Leng and Catherine Cadell Editing by Robert Birsel)


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