Will the financial woes of Greenland affect its Singapore digibank?

Written by Kapronasia || October 02 2023

Greenland Financial Holdings has always been an unusual candidate for operating a digital bank in Singapore. The company is in essence a large state-owned real estate developer based in Shanghai. Compared to tech and telecoms giants that won the other licenses in the city-state, Greenland is less market oriented. It’s more like a real estate arm of the Chinese government. Given the trouble that China’s property sector has been experiencing, as well as a recent bond default, it is worth pondering if Greenland’s digital bank in Singapore could be affected.

When Greenland won a Singapore digital bank license back in December 2020, many observers were surprised. It was unclear why a state-owned property developer in China would want or need a digital bank in Singapore. Sure, it could lend to Chinese enterprises operating in the city-state but we thought there were many other applicants for the digital wholesale bank (DWB) license, that allows holders to serve exclusively non-retail clients, that were at least as well qualified as Greenland – if not more so.

However, if a key criterion – maybe the most important factor - to win the license was adequate capitalization, then Greenland would have had an edge over the many applicants with fewer assets. It has been a Fortune 500 company for 11 consecutive years and ranked 125th last year, with assets of US$231.28 billion and revenue of US$84.45 billion.

However, in July, Greenland defaulted on a dollar bond worth US$432 million due to a missed amortization payment. Greenland was the first state-backed developer to extend dollar bond payments after the property sector plunged into a debt crisis in mid-2021. HSBC, trustee for Greenland’s 6.75% bond due June 25, 2024, notified holders on July 14 of an event of default because the developer failed to pay the 5% amortization worth 22.5 million on due day, and the failure continued for the next seven days, according to Debtwire.

In late July, Moody's cut the credit ratings of Greenland to Ca- a level that signals imminent default. "The downgrade of Greenland Holding with a negative outlook reflects the company's weak liquidity and our expectation of weak recovery prospects for Greenland Holding's bondholders," Moody's analyst Daniel Zhou told Reuters.

Greenland is literally swimming in debt, having swung for the fences (as China’s large property developers tend to do) by not only building big projects at home but also constructing Sydney’s tallest residential tower and had planned to build something similar in London. Greenland’s debt repayments in the next year to 18 months include about US$900 million of bond maturities by the end of 2024.

While Greenland’s debt problems may not directly affect its Singapore digital bank from a financial standpoint, from a reputational one, none of this can be very good.  

That said, the bank’s leadership appears unfazed thus far by the travails of its parent company. Chairman Geng Jing said in June Green Link Digital Bank expects to break even by 2025, that its loan book had grown to S$50 million and that it was eyeing an IPO on the Singapore Exchange (SGX) within five years.

Meanwhile, a unit of Greenland is also planning to apply for a license to trade virtual assets in Hong Kong. “We want to expand our digital financial business in Hong Kong as our gateway to the world,” Geng Jing told The South China Morning Post in May.