China Life acquires Industrial Bank stake
China Life Insurance (Group), parent of the mainland's largest life insurer, has bought a 392 million yuan stake in the Industrial Bank before the lender's proposed domestic public share sale.
The purchase is the latest step by China Life Insurance and its parent to boost returns on investment portfolios or diversify business under their new leadership.
China Life Group submitted the winning bid of 5.60 yuan a share in a June auction of 70 million shares of the nation's 12th-largest lender by total assets at the end of 2004.
The recently completed acquisition gave China Life a 1.75 per cent stake in the Fujian-based Industrial Bank which has had an application pending before the China Securities Regulatory Commission for a domestic initial public offering reportedly worth 10 billion yuan.
China Life Group's purchase price valued the bank at 1.84 times its book value at the end of last year while the five domestically-listed second-tier banks traded at up to 3.35 times book value yesterday.
Under Yang Chao, chairman of China Life and president of its parent, the China Life companies in June purchased a combined 16.77 per cent stake in Citic Securities, the mainland's second-most profitable securities house last year, for 4.65 billion yuan.
China Life has also joined a Citigroup-led group bidding for the controlling stake in Guangdong Development Bank, the nation's 11th-largest commercial lender.
Like other mainland insurers, the China Life companies were previously forced by regulations to put most of their investment assets in low-yielding term deposits and government bonds.
Taking advantage of relaxed rules, China Life's stock investments might have grown to 8.2 per cent of its total investment portfolio by June, a China International Capital Corp report said last month.
China Life earlier this year sold about half of the more than 800 million Hong Kong IPO shares of China Construction Bank it subscribed to in October last year for HK$1.6 billion to HK$1.7 billion, an up to 60 per cent capital gain, sources said yesterday.
