DBS to acquire largest stake in Shenzhen Rural Commercial Bank for S$1.08 bil
SOUTH-EAST Asia's largest lender DBS will acquire a 13 per cent stake in Shenzhen Rural Commercial Bank (SZRCB) for 5,286 million yuan (S$1.08 billion), in a move that will make it the largest shareholder of the Chinese bank.
In a statement on Tuesday, DBS said it will acquire 1.35 billion new shares in SZRCB at 3.91 yuan per share, representing 1.01 times the book value per share of SZRCB, as at end-December 2020.
"The investment is in line with the group's strategy of investing in its core markets, and accelerates its expansion in the rapidly growing Greater Bay Area," the statement said.
China is one of DBS' six core markets, along with Singapore, Indonesia, India, Hong Kong and Taiwan.
The investment will have less than 0.2 percentage points' impact to the banking group's capital ratios, and is expected to be "immediately accretive" to earnings and return on equity.
Established in 2005 and headquartered in Shenzhen, SZRCB is a privately-owned commercial bank. It currently operates one of the largest bank branch networks in the south-eastern Chinese city, servicing over five million active retail customers and over 170,000 active corporate customers.
Based on SZRCB's financial results for the year ended last Dec 31, the bank generated 4.8 billion yuan of net profit after tax.
It has 519 billion yuan (S$106 billion) in total assets and 404 billion yuan (S$82 billion) in deposits.
DBS chief executive officer Piyush Gupta said: "We see this as a highly complementary strategic partnership that will allow us to double down on the Greater Bay Area and leverage SZRCB's local network and know-how to deepen DBS' Greater Bay Area strategy. At the same time, we would be able to support the continued growth and digital transformation of SZRCB through our regional presence and digital capabilities."
DBS said it intends to fund the investment using internal cash resources. The investment is expected to complete upon receipt of the China Securities Regulatory Commission's approval.
At DBS' annual general meeting in March, Mr Gupta said his bank is looking to double down its presence in China and India, as part of efforts to expand. Its three focus areas in China include an upcoming securities joint venture announced last September, the consumer finance market and the Greater Bay Area.
DBS is also one of the Singapore banks said to be eyeing parts of Citigroup's consumer business in Asia.
DBS' announcement on Tuesday comes months after its takeover of the cash-strapped Lakshmi Vilas Bank in India, which added sizeable branch network to its fold in India.
Shares of DBS closed flat at S$29.02 on Tuesday.
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