Lender BOC Hong Kong Holdings Ltd announced today (July 15th) that it plans to sell subsidiary Nanyang Commercial Bank (NCB) for HK$68 billion (£5.6 billion).
It said the sale of NCB will help streamline the group's operations by eliminating competition with BOC on the mainland, Reuters reports. It will also allow it to focus more on business in Southeast Asia. In a statement, BOC explained it will sell 100 per cent of its stake in NCB and bids will be accepted until August 25th. The potential suitor or its controlling shareholder must be a financial institution with Chinese government ownership of more than 50 per cent.
Nanyang Commercial Bank had 42 branches in the city and 38 outlets in mainland China at the end of 2014, with HK$303.9 billion of consolidated assets, according to its annual report.
NBC's non-performing loans are up
About half of NCB’s loans last year were booked in mainland China, which currently experiences a sharp rise in non-performing loans. At the end of June last year, It had a non-performing loan ratio of 0.73 per cent, up 39 basis points in six months, according to BOC Hong Kong.
"Considering the extent of bad loans at NCB, this [asking price] seems a bit rich,” Mizuho Securities Asia banking analyst Jim Antos told the South China Morning Post.
If successful, the deal would be the biggest one in Hong Kong's history. The current deal record was set by Singaporean bank DBS's purchase of Dao Heng Bank for $5.4 billion in 2001.
But Li Shanshan, a Beijing-based analyst at Bocom International Holdings Co, told Bloomberg that the price is justified. "This deal gives the potential buyer full control of NCB. That’s why the seller can ask for a high price. Deals like this are always expensive," he said.
BOC Hong Kong is a unit of Bank of China Ltd , the fourth-biggest lender by assets in China.
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