Bank of East Asia sells consumer finance assets to Chinese lender QL Finance for HK$1 billion

Bank of East Asia, Hong Kong’s largest independent bank, has sold a package of consumer finance assets to Chinese money lender QL Finance for HK$1.08 billion (US$139 million), as part of an ongoing drive to cut costs and streamline operations.

The assets sold in this latest divestment belong to BEA’s wholly owned subsidiary Credit Gain, the bank announced on Wednesday evening. They include two China-based microfinance lenders, Shenzhen Credit Gain and Chongqing Credit Gain, and Chongqing Dongrong, a business consultancy based in the south western metropolis of Chongqing for a combined HK$665 million.

BEA also sold a portfolio of Credit Gain’s Hong Kong loans to QL Finance for HK$414 million.

A spokeswoman for BEA said that the disposal had followed a review of the bank’s strategic investments.

“Having considered the current business environment and regulatory requirements, we believe that the money lender business will have a greater prospect if it is operated by a money lender operator group,” she said.

China’s microfinance industry has come under regulatory scrutiny following concerns about the rapid growth of consumer loans and allegations of heavy handed behaviour from some loan collection agents.

Last week, the People’s Bank of China said that it would stop licensing any new online microfinance lenders, while offline bricks-and-mortar lenders would be constrained to operate within their registered locations, according to an order seen by the South China Morning Post.

QL Finance is a wholly owned subsidiary of Beijing-based China Financial Services Holdings (CFSH), which provides loans and financial services primarily to small and medium enterprises.

In a statement to the Hong Kong stock exchange on Wednesday, CFSH said that buying the assets would double its loan portfolio in Hong Kong, and that owning the businesses in Chongqing and Shenzhen would mean it would become a multi-regional and multi-product financial services group.

The company has been on an expansion drive in recent months. In April, CFSH bought another SME lender in south west China, Chengdu Vision Credit. In a statement accompanying its interim results in August, Chan Yuk Ming, CFSH’s chairman, said that it was looking to make further acquisitions.

In contrast, BEA has been cutting back.

In early 2016, the bank embarked upon a three-year cost-cutting programme, hoping to remove HK$700 million of costs from the business.

The bank said with its interim results that it was two thirds of the way though this programme.

Last year, BEA sold its 75 per cent stake in professional services firm Tricor, netting about HK$3 billion, and also sold its rural banking subsidiary based in the northern Chinese province of Shaanxi for 24 million yuan (US$3.6 million).

BEA did not disclose how they would use the proceeds from this latest sale. Brian Li Man-bun, one of BEA’s deputy chief executives, said previously that part of the proceeds from previous asset sales would be used to invest in some new projects, including a microfinance company in Cambodia, investment banking operations, securities joint venture in the mainland, as well as investing in its current operations.