Hang Seng signs agreement to become largest shareholder of a mainland city bank

Hang Seng Bank (Hang Seng) today signed an agreement to subscribe for 20 per cent of the enlarged share capital of Yantai City Commercial Bank (Yantai City Bank) in mainland China for a total consideration of RMB800 million (US$103 million). Upon successful completion of the share subscription, Hang Seng will become the largest shareholder of Yantai City Bank, which serves the rapidly developing Bohai Economic Rim region.

The share subscription and the terms of the agreement are subject to the approval of the China Banking Regulatory Commission, other relevant regulatory authorities and shareholders of Yantai City Bank. Hang Seng will have the right to nominate Directors and to make recommendations for various senior management positions, including Vice President and department heads, at Yantai City Bank.

The strategic investment in Yantai City Bank will complement Hang Seng’s existing foothold on the Mainland as the majority of Hang Seng’s outlets are situated in the Pearl River Delta and Yangtze River Delta regions. Following this latest investment, Hang Seng’s total investment on the Mainland will increase to about RMB7.3 billion, including the capital injected into its wholly owned subsidiary, Hang Seng Bank (China) Limited, in May last year.

Hong Kong-listed Wing Lung Bank will also take a 4.99 per cent stake in Yantai City Bank, bringing the total foreign shareholding in the Mainland bank to 24.99 per cent. Under current Mainland regulations, the maximum aggregate shareholding by all foreign investors in a domestic bank must not exceed 25 per cent.

Today’s signing ceremony in Yantai was attended by Mr Zhang Jianting, Mayor of Yantai, Mr Zhang Guangbo, Vice Mayor of Yantai, Mr Zhuang Yonghui, Chairman of Yantai City Commercial Bank, Mr Raymond Or, Vice-Chairman and Chief Executive of Hang Seng Bank and Dr Patrick Wu, Vice-Chairman and Executive Director of Wing Lung Bank.

Mr Zhuang said: “In light of the accelerating pace of reform and opening up of China’s financial industry, the bringing in of Hang Seng as a strategic investor will facilitate the sharing of experience, enhance corporate governance and promote a better business structure. This will help us to achieve international standards and enhance our market competitiveness.”

“Wing Lung Bank’s participation as a financial investor will also enhance both the shareholding structure and development of Yantai City Commercial Bank,” he added.

Mr Or said: “This agreement is another milestone in the rapid expansion of Hang Seng’s business on the Mainland. The Bohai area will join the Pearl River and Yangtze River Deltas as a key business region for Hang Seng. Alongside our organic growth, we will actively discuss future business cooperation opportunities with Yantai City Commercial Bank.”

“Our agreement will also benefit the economic development of the Bohai Economic Rim and facilitate the exchange of banking experience and technical expertise,” Mr Or added.

Yantai is an international port city in the Bohai Economic Rim region and the second-largest industrial city in Shandong Province. Yantai has a very sound economic infrastructure. In 2006, the city’s GDP grew by 17 per cent to reach RMB240.2 billion.