CDB looking to gain foothold in lucrative finance leasing market

PUBLISHED : Friday, 22 February, 2008, 12:00am
UPDATED : Friday, 22 February, 2008, 12:00am

China Development Bank (CDB), one of the mainland's three policy lenders, plans to put up more than seven billion yuan to buy a more than 90 per cent stake in an aircraft-leasing company in Shenzhen to compete head on with major commercial banks in the booming lease-financing market.

The Shanghai Securities News reported yesterday that CDB had reached agreement with Shenzhen Financial Leasing on the purchase, with further negotiations with shareholders and Shenzhen authorities to follow.

Industry sources said CDB, which had long sought to either establish or buy a finance leasing unit, saw opportunity in the Shenzhen company's offer to take a stake.

Shenzhen Financial Leasing was established in 1999 and has a registered capital of 716 million yuan. It has two aviation-related companies as its biggest shareholders - Hainan Airlines with 21.66 per cent and Xian Aircraft Industry Group, which owns 18.16 per cent.

Published data showed the company had 5.1 billion yuan in total assets as of the end of 2005. Its major income came from aircraft leasing.

It reported a net profit of 11 million yuan for 2006, a sharp increase from 1.26 million yuan a year earlier.

If approved, the deal would raise the finance leasing company's capital 10-fold, making it the biggest company of its kind on the mainland.

Following the issuance of a new rule last year allowing qualified commercial banks to set up finance leasing companies, major state-owned banks such as the Industrial and Commercial Bank of China, China Construction Bank and Bank of Communications have gone ahead and established such units. None of these companies has a registered capital of more than 4.5 billion yuan.

This capital advantage would allow CDB more use of its greater spending power to acquire customers, analysts said. CDB reportedly has won central government approval to restructure itself into a commercial bank and is expected to list in the domestic stock market within the year.

Flying start

CDB plans to achieve capital advantage over other major banks

For Shenzhen Financial Leasing, it is willing to pay more than, in yuan: Y7b