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Bank of China

BOCHK realises HK$30 billion profit from Nanyang sale

New owner said NCB’s platform is highly complimentary to Cinda’s business; pledges to retain staff

PUBLISHED : Monday, 30 May, 2016, 6:30pm
UPDATED : Monday, 30 May, 2016, 6:35pm

Bank of China (Hong Kong) is set to realise a HK$30 billion profit, after its HK$68 billion sale of subsidiary Nanyang Commercial Bank to mainland “bad bank” asset manager China Cinda Asset Management officially closed on Monday.

The BOCHK board has yet to meet and decide whether there will be a special dividend awarded to shareholders from the sale, as compared to its longstanding dividend policy of sharing between 40 - 60 per cent normal business profit with shareholders, said Ronick Chan Chun-ying, board secretary of Bank of China (Hong Kong), who spoke after the official handover ceremony.

After today’s cash injection, BOCHK believes it will see its common equity tier-one ratio (CET1), a measure of the bank’s capital sufficiency, rise by 6.7 percentage points from its latest level at about 17 per cent, making it one of the most capital robust banks in the territory.

“It should be enough for our business development for the foreseeable future,” Chan said, when asked by the The Post whether further fundraising activities might be needed.

Chan said some uses for the funds had already been earmarked.

“We will use the funds released from the sale today to acquire our parent’s Asean assets. This is one part of the use. Our own BOCHK business will also see further development which requires capital support. There are also the regulatory requirements to think of, which since 2009 has been raised gradually every year. Some of the funds are to go to meeting regulatory requirements. So the planned use of funds will be for multiple projects rather than singular items.”

Chan said no information regarding the costs and timing for the asset transfer from its parent Asean entity could be disclosed at this stage, as acquisitions involving multiple jurisdictions require approval from various regulators, including the Hong Kong Monetary Authority and the China Banking Regulatory Commission.

Chan declined to give further clarity on the rumoured sale plans for the bank’s holding in local lender Chiyu Bank.

“We are now undertaking a feasibility study. The result may or may not lead us to make further asset sales. We can’t say conclusively there will be one at this stage.”

Fujian-based Xiamen International Bank is ready for a takeover of Chiyu, with reports saying it is prepared to pay US$2 billion. The takeover has reportedly won support from the local municipal government as part of an internationalisation plan.

Cinda chairman Hou Jianhang called the takeover of NCB “a historical moment” adding that it is a springboard to enable the group’s future innovation and transformation. He said the sale was part of its plan to answer the State Council’s call for bad debt asset managers to “commercialise” a few years ago.

The bank’s new owner said cross-border finance and asset management, and corporate business are priorities in the group’s strategy. It will leverage NCB’s risk management skills and look for a differentiated commercial bank positioning, the management said.

Ai Jiuchao, board secretary promises Cinda will strive for a stable handover, work to earn management and staff confidence, and that there will be no mass layoffs during the transition period.

“Nanyang’s qualities are highly complimentary to Cinda. We are quite confident the synergies will soon show through in the results after today’s acquisition.”

“After a decade of conditioning under Bank of China (Hong Kong), both Nanyang’s business and staff quality are very high. They are key attractions. We are here to ensure stable developments at Nanyang.”

“I believe Nanyang will see better development opportunities after joining Cinda’s group of businesses. It will provide better service to Hong Kong and mainland customers.”

Fang Hongguang, chief executive of NCB said Hong Kong clients are still the bank’s first priority.

China Cinda Asset Management closed 0.41 per cent higher at HK$2.47 a share on Monday. BOCHK was up 1.94 per cent to HK$23.70 a share.