(Yicai Global) May 27 -- Bank of Wenzhou has orchestrated a major reshuffle of top level management, appointing five new senior executives from a local rural credit cooperative, indicating that the lender in southeastern Zhejiang province has undergone a change in ownership, a source familiar with the matter told Yicai Global.

Chen Hongqiang and four other members of senior management from the Zhejiang Rural Credit Cooperative Union will take up posts at the Bank of Wenzhou, including chairman of the board and president, the source said.

That would mean that the rural credit cooperative, which runs 80 rural commercial banks and one rural credit union in the province, is now the bank’s largest shareholder, he added. As of the end of last year, Wenzhou State Owned Financial Capital Management was the majority stakeholder with 31.77 percent equity. Exact details on the change in ownership and financials involved have not yet been made public.

The injection of new funds is not necessarily a good omen for the Bank of Wenzhou. The bank's capital adequacy ratio has been declining each year and is fast approaching the regulatory bottom line. Last year it slipped to 10.75 percent from 11.17 percent in 2019 and both its Tier 1 capital adequacy ratio and core Tier 1 capital adequacy ratio fell to 8.53 percent from 9.57 percent.

Regulations stipulate that the capital adequacy ratio must not be less than 10.5 percent, the Tier 1 capital adequacy ratio no lower than 8.5 percent and the core Tier 1 capital adequacy ratio must not be under 7.5 percent.

Last September the bank raised around CNY7 billion (USD1.1 billion) through new share issues but the amount was not enough to meet its funding requirements.

Meanwhile, profits have been shriveling for some time. Last year it logged a 77 percent plunge in profit from the year before to CNY159 million (USD24.9 million). Revenue edged up 0.08 percent to CNY4.2 billion.

The drop in profit is due to a big increase in asset impairment losses, which is when the value of an asset diminishes to below its book value, which swelled by CNY835 million (USD131 million) last year to CNY2.4 billion (USD376 million).

To add to the Bank of Wenzhou’s woes, its former president Wu Hua is being arraigned for graft, corruption and embezzlement.

Editors: Tang Shihua, Kim Taylor