China's fifth-largest bank has sacked the head of a northern branch and launched a fraud probe, but talks to sell a fifth of its shares to HSBC are going smoothly, official media on Saturday cited the bank as saying.
Analysts have said a 20 percent stake in China's Bank of Communications could be worth between $1 billion and $2 billion.
Shanghai-based Comms Bank, reportedly considering a foreign listing early next year after an internal overhaul, is probing an official report that its Jinzhou branch faked 200 million yuan ($24.2 million) in non-performing loans.
That report was posted on the Web site of the National Audit Office (www.audit.gov.cn).
Comms Bank has repeatedly declined comment, and HSBC was not available to comment.
"We're investigating the report of irregularities at our Jinzhou branch. We will deal seriously with this case according to the law," the Shanghai Securities News cited a bank spokesman as saying.
Financial corruption is not new to China.
But banks are increasingly in the spotlight as Beijing is eager to lure foreign investors to inject global capital and practices into an industry saddled with more than $200 billion in non-performing loans.
Overseas banks such as Citigroup have bought stakes in banks, eyeing their vast product distribution network.
But analysts say they have to balance a desire to get at $1.3 trillion in savings against issues over management control and the risk of hidden bad loans or differences over loan classification.
Still, talks between HSBC, the world's second-biggest bank by market value, and Comms Bank have been smooth and both parties are now ironing out details, the newspaper cited the bank spokesman as saying.
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