Ping An injects 20b yuan to raise stake in bank

PUBLISHED : Friday, 19 August, 2011, 12:00am
UPDATED : Friday, 19 August, 2011, 12:00am


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Ping An Insurance (Group), the mainland's second-largest life insurer, says it will inject up to 20 billion yuan into Shenzhen Development Bank in a bid to help the lender meet new capital adequacy requirements.

The insurer agreed to subscribe to 892 million to 1.19 billion new shares in the Shenzhen-listed bank at 16.81 yuan apiece, or about 15 billion yuan to 20 billion yuan (HK$24.43 billion) in capital. As a result, the insurer's share in the bank will increase to 61.36 per cent from 52.38 per cent.

The increments will increase the bank's core-capital adequacy ratio to 13.76 per cent from 7.01 per cent.

Since Ping An will fund the acquisition with internal resources, investors are likely to worry about potential new share placements by the insurer, which has already raised about 21 billion yuan in equity and bonds this year, said a Merrill Lynch report yesterday.

Shares in Ping An dropped 3 per cent to HK$65.05 yesterday.

The move is seen as part of the insurer's long-term goal of merging its two banking subsidiaries - Ping An Bank and Shenzhen Development Bank (SDB).

'SDB will buy the 9 per cent stake in Ping An Bank it doesn't own now and merge with it in the future,' said Sun Jianyi, vice-chairman of the insurer, yesterday.

After a restructuring plan approved by the China Securities Regulatory Committee in June, SDB has a 90.75 per cent stake in Ping An Bank while Ping An Group owns 52.38 per cent in SDB. Ping An Bank reported a net profit of 1.2 billion yuan in the first half of this year, up 35 per cent year on year. In the same period, SDB contributed 1.18 billion yuan in earnings to Ping An Group.

The group aims to increase earnings from its banking segment to be on par with its insurance division in five years, said Dr Peter Ma Mingzhe, chairman and chief executive of Ping An Insurance. The group projected that its investment business, including asset management, trust and securities, would account for one-third of its total profit, the same as the earnings in its banking and insurance divisions, in the next 10 years, he said.

In the first half, its insurance business contributed 9.45 billion yuan in net profit, while banking and investments reported 2.4 billion yuan and 1.15 billion yuan respectively.

Ping An reported on Wednesday its net profit had increased 32.7 per cent year on year to 12.75 billion yuan in the first half.