BOC Hong Kong has sent out preliminary documents to potential acquirers of Nanyang Bank asking them to submit bids by mid-April.
BOC Hong Kong Holdings, controlled by China’s fourth-largest lender, has started a sale process focused on attracting a Chinese buyer for its Nanyang Commercial Bank unit, people familiar with the matter said.
Bank of Beijing Co, part owned by ING Groep, as well as the nation’s largest insurer China Life Insurance and bad-loan manager China Cinda Asset Management are among companies that have expressed interest in the Hong Kong lender, the people said. The bank has sent out preliminary documents to potential acquirers and asked for first-round bids by mid-April, they said, asking not to be identified as the information is confidential.
Nanyang offers a foothold in the Chinese banking hub as Hong Kong’s role in cross-border financing expands. BOC Hong Kong is seeking a valuation of about $5bn for Nanyang, the people said.
China Life has “always been closely watching various major deals in the market,” Vice President Yang Zheng said on the sidelines of a press conference in Beijing yesterday. The insurer will “prudently” evaluate the potential impact from such deals before proceeding, he said, declining to comment specifically on Nanyang.
A deal would add to the $6.8bn of bank acquisitions completed in the city last year, data compiled by Bloomberg show. BOC Hong Kong rose 1.7% to HK$27.40 at the close in Hong Kong, the biggest gain in almost two months, while the benchmark Hang Seng Index climbed 0.5%.
BOC Hong Kong declined to comment in an e-mailed statement, while Bank of Beijing Board Secretary Yang Shujian and Cinda Board Secretary Zhang Weidong didn’t answer phone calls seeking comment. BOC Hong Kong said on January 29 it was conducting a review of its portfolio as it considered whether to dispose of banking assets. It has expressed a preference for Chinese buyers for Nanyang, as they might benefit more from cross-border business ties and the state-backed lender doesn’t want to be perceived by the government as selling assets on the cheap to a foreign suitor, the people said. Nanyang had 42 branches in Hong Kong and 14 in China at the end of 2013, with HK$280.4bn ($36.2bn) of consolidated assets, according to its annual report. In December last year, Moody’s Investors Service cut the bank’s rating, citing concerns about rising bad-loan risks from its rapid mainland expansion.
BOC Hong Kong runs branches in the city under its own name, as well as through its Nanyang and Chiyu Banking Corp units.
The bank isn’t currently selling Chiyu, the people said.
Some smaller Hong Kong lenders have sought buyers as they face higher capital requirements and pressure from larger rivals. Yue Xiu Group, an investment arm of southern China’s Guangzhou city, completed its $1.5bn acquisition of Chong Hing Bank in February last year. Oversea-Chinese Banking Corp, Southeast Asia’s second-largest lender by assets, bought Wing Hang Bank for about $5bn.
Nanyang’s return on equity, a measure of profitability, was 9.04% in the latest half-year period, below the median 11.82% return for Hong Kong banks, according to data compiled by Bloomberg.
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