In a recent turn of events, Haima Automobile, a company that has been battling financial struggles, is once again on the verge of divesting its shares in Hainan BankThis decision comes as the company grapples with cumulative losses nearing 3 billion yuan over the past four yearsThe dire state of its finances has led Haima to adopt drastic measures, including the sale of its assets, in hopes of securing vital funds.

On the evening of June 28, Haima disclosed that its subsidiary, Haima Financial Co., Ltd., is planning to offload all of its shares in Hainan Bank, which constitute approximately 12% of the bank’s total equityThis move marks a significant moment as it will be the second attempt in three years to reduce its stakes in Hainan BankThe pre-listing announcement is now set to occur on national property trading platforms, including the Shanghai United Assets and Equity Exchange.

Previously, in February 2021, Haima had announced plans to sell 7% of its holdings in Hainan Bank to China Railway Investment for 330 million yuan

If the current shares are sold at a similar valuation, Haima could potentially recoup around 566 million yuan from this latest decision.

But what has compelled the company, a founding shareholder in Hainan Bank, to reconsider its stake once again? The truth lies in the contrasting fortunes of Haima's automobile production side and the banking institutionInitially, Hainan Bank was heralded for its rapid growth and expansive initiatives aimed at entering international capital marketsHowever, the reality has been soberingThe margin of net interest income has narrowed, putting the bank in a stagnant phase while its earlier promise of an overseas listing has slowly faded into obscurity.

At the same time, the automobile market has become increasingly competitiveHaima’s financial reports have revealed staggering deficits, summing to 3 billion yuan in losses over the past four years

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With mounting pressure, the company finds itself at a crossroads, leading to the painful realization that divesting portions of its business could be the only path to survival.

This decision to treat Hainan Bank as a 'discarded piece' of its portfolio reflects just how far Haima has fallen from its once-promising status in the automotive marketAs their financial woes worsen, selling off 12% of Hainan Bank ownership might provide much-needed liquidity, albeit at the cost of a significant financial connection.

Although the planned transfer aims to facilitate asset optimization and refocus resources into core operations, Haima's prior attempts to divest these shares indicate an ongoing shift within the company's strategyThe need for cash to remain solvent has seen Haima Financial continuously seeking buyers for its bank shares, attempting to leverage every possible asset during a time of extreme volatility.

So far, the trend of equity changes within Hainan Bank has been robust

Not only is Haima considering this sale, but other stakeholders have also been offloading portions of their holdingsIn 2020 and 2021, significant partners such as Huaxin International and HNA Group exited their investments as well, indicating a challenging environment for all involved.

In contrast, the hopes that Hainan Bank would eventually achieve a listing on an overseas exchange have seemingly been dashedAfter a flurry of enthusiasm when newly established in 2012, the bank reported early profitabilityIts inaugural financial year yielded a net profit of over 100 million yuan, and its asset management has since seen substantial growth.

However, this growth has not been without its difficultiesThe bank’s non-performing loan rates have followed a concerning upward trajectoryAs of 2023, the bank's NPL ratio stood at 1.62%, markedly higher than the average across commercial banks, raising alarms about its long-term sustainability.

Additionally, Hainan Bank's capital adequacy ratios have dipped, pointing towards a troubling trend

From a robust 19.56% in 2016, by 2023, these figures plummeted to just over 11%, significantly below industry standardsThe bank's aspirations of expanding its presence have contradicted the reality of diminishing resources.

It is clear that Haima is struggling in its quest to revive its automotive venturesWhile selling assets like Hainan Bank shares may offer temporary relief, it is not a sustainable strategyIn 2021, relinquishing control of certain operating divisions netted substantial returns, yet it cannot replace the need for a competitive product line that resonates with consumers.

Through the years, Haima has toggled between peaks of success and valleys of disappointing returnsFounded in 1988, it saw its heyday in 2016, only to enter a recession where sales churned downward dramaticallyRecent leadership changes brought a brief uptick in performance, however, the first quarter of 2024 reveals a resounding plunge in sales by over 80% compared to previous years.

While the landscape is undoubtedly challenging, Haima’s future is intertwined with its ability to navigate both financial constraints and market demands effectively