Mainland and offshore firms have made reasonable offers to buy Hong Kong-based Shanghai Commercial Bank (SCB) but the deals hit technical snags because the lender’s parent is based in Taiwan, the bank’s chairman said Wednesday.
“The price for acquiring us is about triple the price-to-book ratio that China Merchants Bank Co. Ltd. (03968.HK, 600036.CN) offered Wing Lung Bank, but because our parent company is in Taiwan and selling our firm would affect business links with Hong Kong, China and Taiwan, shareholder equity is an issue,” chairman Lincoln Yung said Wednesday.
Yung said the deals ultimately fell through. The lender also has no plan to list in Hong Kong.
The comments come after the sale of several Hong Kong lenders to non-local buyers, including Oversea-Chinese Banking Corp.’s purchase of Wing Hang Bank and Yue Xiu Group’s takeover of Chong Hing Bank (01111.HK).
China Merchants Bank said in 2008 that it had agreed to pay HK$19.3 billion in cash, or 2.9 percent of the price-to-book ratio, to Wing Lung Bank’s Wu family for a controlling stake in the lender. Wing Lung is now a wholly owned subsidiary of China Merchants.
SCB, which was established in November 1950, has an alliance with Bank of Shanghai on the mainland and the Shanghai Commercial and Savings Bank in Taiwan.
The lender said its loans grew by 15.6 percent last year and it aims to develop its business through organic growth. “Loan growth for the first quarter was at about 8 percent. The bank aims to achieve low double-digit growth for the full year,” chief executive David Kwok said.
“We [also] do not expect the Hong Kong Monetary Authority to ease the stable funding requirement. But it could tighten the stress tests for banks.”
HKMA has advised most banks to have 20 percent loan growth against their stable funding requirement level. The 20 percent level was set based on an industry average in 2013.
Alternate chief executive Paul Wong said SCB will strengthen corporate finance and loans to small and medium enterprises to boost corporate business this year. “It would be better if the bank can keep [that segment] at half of the business.”
Currently, retail clients account for about 60 percent of the lender’s business while corporate clients make up the rest.
While SCB is a commercial bank, the industry trend is towards wealth management, which means the development of credit cards and mobile banking is necessary, he added.
“We are seeking to launch a tri-currency credit card which allows users to pay in renminbi, Hong Kong dollars and Taiwan dollars,” he said.
Kwok said the credit card is in the pipeline but there is no specific timetable for the launch. But a dual-currency card will be launched this year.
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