Australia’s biggest bank scales back stake in Chinese lender amid continuing bilateral tension
- Commonwealth Bank of Australia has sold 10 per cent of its stake in the Bank of Hangzhou, in a move many attribute to worsening trade relations
- Commonwealth Bank of Australia is the latest to reduce its stake in a Chinese bank, even as US and Europeans try to get deeper into the market
Australian banks are retreating from China’s most lucrative financial businesses, even as Wall Street and European competitors queue up to get deeper into the world’s second largest market.
Commonwealth Bank of Australia, the largest Australian bank, announced on Tuesday that it has signed a deal with two state-owned Chinese entities to transfer a total of 10 per cent stake in the Shanghai-listed Bank of Hangzhou at 8.2 billion yuan (US$1.3 billion), according to its filing to the Australian Stock Exchange.
The Australian-China relations being so bad, then I would guess that there seems very little upside in this deal for many years to come
Commonwealth Bank of Australia, which became the local bank’s strategic investor in 2005, will keep a 5.56 per cent stake for three years, but the share transfer means the Hangzhou municipal fiscal bureau, which now owns 11.86 per cent, is the largest shareholder.
The Bank of Hangzhou is China’s seventh largest city commercial bank by asset size, with January-September profits up 26.2 per cent to 7 billion yuan, non-performing loans of 0.9 per cent and provision coverage ratio of 559.4 per cent.
While the Australian bank’s chief executive officer Matt Comyn attributed it to the strategy of focusing on core banking business in Australia and New Zealand, analysts said it is the latest jigsaw piece that outlines the fast shrinking Australian business presence in China.
Fraser Howie, co-author of Red Capitalism: The Fragile Financial Foundations of China’s Extraordinary Rise, believed the worsening domestic and international environment led to the decision.