China Life is now top Minsheng stakeholder
Insurer's stock purchases reflect trend to diversify earnings
China Life Insurance has become the biggest shareholder in China Minsheng Banking, the mainland's first privately owned lender, highlighting efforts by cash-rich insurance giants to diversity their earnings.
The nation's biggest life insurer lifted its stake after buying part of the lender's offering of 18.2 billion yuan new shares. China Life invested 5.4 billion yuan, not including the stock it bought from the open market.
The insurer now holds a 6.17 per cent stake, or 894 million shares, exceeding the 5.9 per cent stake of the former largest shareholder Sichuan New Hope Investment, according to a statement to the Shanghai Stock Exchange yesterday.
Besides Minsheng, China Life has stakes in Bank of Communications, China Citic Bank Corp and Guangdong Development Bank. It also reportedly plans to buy provincial and city lenders such as Huishang Bank and Zhuhai City Commercial bank. The insurance industry, which has been one of the major beneficiaries of the mainland stock surge, had 1.97 trillion yuan worth of assets at the end of last year.
'Insurers could make more money from buying stocks [in these banks] but they have to be careful of the risks of a downfall in the sector,' said Luo Jing, an analyst with Guotai Junan Securities (Hong Kong).
Ping An Insurance, the nation's second-largest life insurer, has bought stakes in several lenders to increase returns on investments. It also aims to develop its own bank brand after a merger between Shenzhen Commercial Bank and Ping An Bank.
Ping An was ranked the No4 shareholder of Minsheng after buying 714 million shares in the offering.
'The shareholdings of insurers will help Minsheng improve its corporate management and business expansion,' the lender said.
Sichuan New Hope Investment, which had been the biggest shareholder since 1999, also bought shares in the offering but not enough to remain the largest stake owner. Liu Yonghao, one of the mainland's richest entrepreneurs, said in March that his firm wanted to remain the biggest shareholder.
Beijing-based Minsheng, set up in 1996, has been running relatively independently as the stakes held by its biggest shareholders are always under 10 per cent. Its board also maintains a balance between shareholders in order to avoid control by a single party. That means China Life may not have the power to control the bank. The current board of Minsheng will serve until July 2009.
Still, the bank is expected to improve the bottom line of its key shareholders. Based on Minsheng's closing share price of 11.7 yuan yesterday, China Life and Ping An have reaped a paper profit of more than 1.87 billion yuan each from their investment.
Minsheng said it would use the proceeds from the share sale to boost its capital and support business expansion. Sources said earlier that Minsheng was in talks to buy part of Changsha City Commercial Bank.
Additional reporting by Nevin Nie
Top 10 shareholders
China Life Insurance 6.17%
Sichuan New Hope Investment 5.9%
China Oceanwide Holdings 5.53%
Ping An Insurance 4.93%
Shanghai Jiante Life Technology 4.82%
Sichuan Southern Hope Industry 4.82%
China Shipowners Mutual Assurance Association 4.01%
China Oriental Group 3.94%
China Mid- and Small-sized Companies Investment Co 3.63%
Xiamen Good First Group 3.45%
China Minsheng Banking Corp
Founded on January 12, 1996
The mainland's first national joint-stock commerical bank
Listed in Shanghai in December 2000
Now the country's 8th largest domestic commercial bank
Has 253 branches in 16 provinces