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SCMP Reporter

Mainland insurer seeks to widen reach by buying out HSBC's stake in unit

Ping An Insurance (Group), the mainland's second-largest life insurer, will buy out HSBC Holdings'   stake in subsidiary Ping An Bank  and then transfer the lender to the group's 89.36 per cent-owned  Shenzhen Commercial Bank.

The move will provide a boost to the insurer's ambitions of making banking one of its core businesses.

Under the deal, the insurer said yesterday it would buy HSBC's 27 per cent stake in Ping An Bank for US$29.4 million.

Ping An Insurance is 19.9 per cent owned by HSBC.

While only 8 per cent of the group's net income for the six months to June came from non-insurance businesses, Ping An said earlier this month that it planned to develop into a full-service financial firm within the next three to five years by boosting its banking and asset management segments  to match the contribution from its insurance business.

To help fund the rapid growth, Ping An  this month raised 38.9 billion yuan in an initial public share offering in Shanghai.

The transaction announced yesterday is subject to approval by the China Banking Regulatory Commission and the shareholders of Shenzhen Commercial.

Ping An Bank, formerly known as Fujian Asia Bank, was acquired by HSBC and the insurer in 2003.

The lender had assets of 1.1 billion yuan at the end of  2005.

The bank is  headquartered in Shanghai and has one branch in Fujian province.

It offers a range of foreign currency services to local and foreign customers, as well as yuan services to corporate customers and foreigners.

The buyout will allow Ping An Bank, now run as a Sino-foreign venture, to become a local lender and offer a full  range of yuan services to individuals.

'Theoretically, if the bank is wholly owned by Chinese investors, it is eligible to convert into a domestic bank with the same business scope as other Chinese lenders,' Bloomberg quoted the insurer's spokesman, Xia Lingwu, as saying.

The insurer bought control of Shenzhen Commercial for 4.9 billion yuan last year.

The Shenzhen city lender is the mainland's 17th-largest bank by assets, with 46 outlets at the end of September last year, spread  across the country's south. It is licensed to offer yuan services, including credit cards, to mainlanders.

An analyst who asked not to be named said that although Ping An wanted to partner with HSBC to expand its banking business on the mainland, the global banking giant had been focusing on Bank of Communications.

HSBC took a 19.9 per cent stake in the mainland's fifth-largest lender before its initial public share offering in Hong Kong in 2005.

'It is natural for the insurer to establish its banking business on  its own,' the analyst said.

Vincent Cheng Hoi-chuen, the chairman of HSBC's Asia-Pacific operations, said the bank would continue to invest in and expand its operations on the mainland as well as strengthening its relations with its strategic partners  Ping An Group, Bank of Communications and Bank of Shanghai, in which it has an 8 per cent stake.

Meanwhile, another analyst said that as Ping An Bank's profit contribution to HSBC was negligible, the sale of the stake would have little impact.

'I wonder whether it was related to the mainland regulation  that foreign banks cannot  make equity investments in more than two banks,' the analyst said.



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