Yue Xiu keen on further expansion
Guangzhou government-backed company sees opportunities for new business in free-trade zone following Chong Hing Bank acquisition
The new parent of Chong Hing Bank is keen on further acquisitions to make the most of opportunities in the proposed Guangdong free-trade zone.
Guangzhou government-backed Yue Xiu was open to acquiring non-Hong Kong financial firms, either on the mainland or in the wider Asia-Pacific region, to help expand Chong Hing, Yue Xiu chairman Zhang Zhaoxing said last week.
Zhang is also the chairman of Chong Hing.
The free-trade zone proposed by the Guangdong authorities would include Hong Kong, Macau, Qianhai in Shenzhen, Hengqin in Zhuhai and Nansha in Guangzhou and cover more than 1,000 square kilometres with a view to competing with the 28.8 sq km free-trade zone set up in Shanghai last year.
The Guangdong proposal has been backed by Hong Kong Chief Executive Leung Chun-ying, who said his government would help in the planning process so that it would benefit both sides.
"The formation of such a free-trade zone brings us opportunities in financial and banking business," Zhang said. "After the acquisition of Chong Hing, we will eye investments in Guangdong which contribute to the region's financial development."
Yue Xiu, an investment vehicle backed by Guangzhou's city government, operates in businesses including real estate, securities and transportation infrastructure, but did not have any banking business before its acquisition of Chong Hing, which was Hong Kong's smallest family-owned lender. It paid the Lui family HK$11.6 billion for a 75 per cent stake in the lender - at a price-book ratio of 2.08.
Zhang said that with the newly acquired bank, Yue Xiu was poised to emerge as an international financial holding firm.
"We will adopt mergers and acquisitions as our development strategy," he said, adding that a 4 billion yuan (HK$5.09 billion) capital injection from the Guangzhou government had strengthened Yue Xiu's expansion capabilities.
Its regional expansion ambitions match those of other mainland financial institutions seeking to establish footholds outside the world's second-biggest economy.
Among the Big Four state-owned lenders, Industrial and Commercial Bank of China acquired nearly 100 per cent of Thailand's ACL Bank in 2010 for US$550 million, and China Construction Bank made a bid for the Dutch lender Rabobank's Indonesian unit last year, according to a news report.
Zhang said Chong Hing had no plans for a rights issue in the next year, in line with a promise made to the Liu family, but might still seek other ways, such as issuing subordinated debt, to beef up its capital with a view to growth.
He said Chong Hing would focus on cross-border business and had no plans to initiate a price war in the local market.
Margaret Leung Ko May-yee, who retired as chief executive of Hang Seng Bank in 2012, has been appointed deputy chairman and managing director of Chong Hing, with Zhang saying the move illustrated Yue Xiu's international outlook. "Although we are a state-owned company, we take an international approach in looking for talent for Chong Hing," he said. "Chong Hing is a Hong Kong firm and we will stick to the local approach and offer incentives and salary according to the local standard."
Leung will earn an annual base salary of HK$11.64 million for the three-year contract and will also enjoy discretionary bonuses and director fees. Her pay tops the HK$9.41 million taken home by Hong Kong Monetary Authority chief executive Norman Chan Tak-lam in 2012, but trails the HK$15.32 million Hong Kong Exchanges and Clearing chief executive Charles Li Xiaojia, and the HK$19.56 million Bank of East Asia chairman and chief executive David Li Kwok-po pocketed that year, including bonuses.
Keen to take advantage of Hong Kong's role as an international financial centre and yuan business hub, Singapore's Oversea-Chinese Banking Corp is holding talks with Wing Hang Bank, the second-largest family-controlled bank in the city, on a possible takeover.
Chong Hing was the second family-owned bank acquired by a mainland company, following China Merchants Bank's HK$4.7 billion purchase of Wing Lung Bank from the Wu family in 2009.