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Ping An, SDB discuss banks tie-up

By Luo Jun and Zhang Dingmin (China Daily)
Updated: 2010-07-01 10:00

Buying stake

Ping An Insurance last month completed buying 520.4 million shares in Shenzhen Development Bank from Newbridge for about 11.45 billion yuan, making it the lender's largest shareholder. The insurer this week won approval to buy as many as 379.58 million new shares in Shenzhen Development Bank in a private placement valued at 6.93 billion yuan.

Ping An Insurance will inject its banking unit into Shenzhen Development Bank, which in return will issue 1.5 billion new shares to the insurer, Caixin Online reported on Wednesday without saying where it obtained the information. The insurer will own 51 percent of Shenzhen Development Bank after the transaction, which is still pending shareholder and regulatory approvals, the report said.

'Difficult'

The insurer may "find it difficult" to sell the banking unit to Shenzhen Development Bank for more than the industry average of 1.5 times book value given weak market sentiment, according to Olive Xia, a Shanghai-based analyst at Core Pacific Yamaichi. That average price would value Ping An Bank at about 21.5 billion yuan, given its 14.3 billion yuan in net assets as of Dec 31.

Shenzhen Development Bank last month appointed Richard Jackson, former head of Ping An Bank, as its president. Any insurance group, "in principle", shouldn't control more than one financial company that operates the same type of core business, according to a China Insurance Regulatory Commission regulation issued in March.

Related readings:  Ping An Insurance to merge its banking unit with SDB  7 Ping An execs join SDB board  Ping An gets regulatory approval on Shenzhen bank deal  Shenzhen bank sees net profits up 700%

The deal may extend Ping An Chairman Peter Ma's push to build a one-stop financial supermarket deriving two-thirds of revenue from non-insurance products in about 10 years. The insurer obtained 14.5 percent of last year's non-life premium income from cross-selling within the group, while 57 percent of Ping An Bank's new credit cards were issued to non-banking clients, according to its 2009 annual report.

Ping An Insurance, part owned by HSBC Holdings Plc, shifted its focus to the domestic market after losing $3.3 billion on an investment in Fortis, formerly Belgium's biggest financial-services company, in 2008.

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