Chong Hing Bank jumps as Liu’s exit sparks takeover speculation

PUBLISHED : Thursday, 29 November, 2012, 10:56am
UPDATED : Thursday, 29 August, 2013, 4:13am

Chong Hing Bank (1111.HK) shares gained the most since July 2010 as the appointment of a chief executive from outside the controlling shareholders’ family prompted speculation the lender may be sold.

Chong Hing advanced 11 per cent, the biggest increase since July 30, 2010, to HK$15.20 as of 10.24am in Hong Kong trading, widening its gain this year to 10 per cent. That compares with a 0.5 per cent advance today for the city’s benchmark Hang Seng Index.

CEO Liu Lit-chi will step down after more than 50 years at the bank when his deputy, Lau Wai-man, gets approval from the Hong Kong Monetary Authority to take over, the lender said in a statement to the Hong Kong stock exchange on Wednesday. Family-owned banks in Hong Kong have drawn interest from buyers, with China Merchants Bank paying US$4.7 billion in 2009 for the Wu family’s Wing Lung Bank.

“In view of the weak fundamentals, we believe it is reasonable for the Liu family to pave the way for a possible sale,” Steven Chan, an analyst at Citic Securities International, wrote in a research report today, upgrading his recommendation to buy from sell. “Due to high funding costs and focus on low-yield loans, CHB has suffered substantial net interest margin erosion in the recent years.”