By P.R. Venkat
SINGAPORE-- Oversea-Chinese Banking Corp. is raising its stake
in Bank of Ningbo, the latest move by the Singapore bank to
increase its exposure to the world's second-largest economy.
A week after announcing that it was in exclusive negotiations to
buy Hong Kong's Wing Hang Bank Ltd., OCBC said Tuesday that it has
agreed to buy up to 207.5 million new ordinary shares in Bank of
Ningbo, which is undertaking a private placement of shares to
current substantial shareholders. The 383 million-Singapore-dollar
(US$303 million) investment will raise the Singaporean bank's stake
in the Chinese lender to 20% from 15.35%.
Faced with limited opportunities for growth at home, Singapore's
second-biggest bank by assets has been expanding its footprint in
other markets. In 2009, OCBC spent $1.46 billion to buy ING Groep
NV's Asian private banking assets, rebranding it as Bank of
Singapore, which has operations in most Asian countries. But like
many peers in Singapore, the bank is looking to invest in mainland
China, even as concerns about growing bad debt mount there.
"China's growing connectivity with the region and the rest of
the world, in terms of trade, wealth and capital flows, and the
increasing internationalization of its currency translate into
excellent prospects for OCBC to grow and develop our business
there," OCBC Chief Financial Officer Darren Tan said in a news
release.
"[B]anking with Chinese companies, onshore and offshore, and
developing the ability to tap into the fast-growing offshore yuan
market will remain a key focus for us," he said.
The exclusive talks with Wing Hang, set to last through January,
would also expose OCBC to Chinese loans, as the Hong Kong-based
lender has branches in mainland China as well as Hong Kong and
Macau. People familiar with the potential deal said it would likely
total more than US$5 billion. UBS analysts said a successful
acquisition would increase the Singaporean bank's loan exposure in
China to 25% from about 15% currently.
While the level of nonperforming loans in China appears to be
under control, they are on the rise, up 38% compared with two years
earlier as of the end of September. Banks have managed to keep the
NPL rate below 1% partly by writing off bad loans, a potentially
expensive exercise.
Nevertheless, Singaporean investors have built up their presence
in China.
For Temasek Holdings Pte. Ltd., China is its second-biggest
investment destination after Singapore. Chinese holdings accounted
for around 23% of the city-state's state-owned investment company's
overall portfolio of US$169 billion as of end March 2013, mostly
banks. For instance, it owns stakes in Industrial & Commercial
Bank of China Ltd. and China Construction Bank Corp., among the
country's largest banks.
DBS Group Holdings, Singapore's largest bank by assets, also has
a presence in China. It bought Royal Bank of Scotland's retail and
commercial banking operations in the country three years ago in a
deal that gave its China unit access to U.K.-based RBS's retail and
commercial banking customer base, business portfolio and related
employees in Shanghai, Beijing and Shenzhen.
OCBC said it would fund the additional stake in Bank of Ningbo
through its internal resources.
Bank of Ningbo is listed on the Shenzhen Stock Exchange. It had
a market capitalization of about US$4.35 billion as of Jan. 10. It
had total net tangible assets of around about US$4.1 billion and a
nationwide network of 200 branches and subbranches--covering the
cities of Ningbo, Suzhou, Shanghai, Hangzhou, Nanjing, Shenzhen,
Wenzhou, Beijing, Wuxi and Jinhua--as of Sept. 30.
OCBC already has a full banking license in China. It operates 16
branches spread across nine cities. It doesn't yet have a retail
presence in Hong Kong, where it operates a single branch that
mostly engages in trading and corporate financing services.
Write to P.R. Venkat at venkat.pr@wsj.com
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