Money

Ping An, SDB shares surge in Shanghai

By Hu Yuanyuan (China Daily)
Updated: 2010-09-03 11:32

An investor watches share price movements on his mobile phone in Shanghai. [Jin Xin / for China Daily]

Insurer to acquire controlling stake in Shenzhen-based lender for $4.3b

BEIJING - Ping An Insurance (Group) Co and Shenzhen Development Bank shares surged in Shanghai on Thursday in anticipation of better profits after the former decided to acquire a controlling stake in the latter late on Wednesday.

Ping An, China's second-largest life insurer, plans to acquire an additional 32 percent stake in Shenzhen Development Bank (SDB) for 29.1 billion yuan ($4.3 billion) through a private placement.

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Ping An's A shares rose 4.52 percent to 48.6 yuan on Wednesday, while SDB shares went up by 3.88 percent to 18.18 yuan, compared with the 1.25 percent increase of the Shanghai Composite index. Shares of both companies were suspended from trading since June 29 this year. Ping An's H shares jumped 2.72 percent to HK$66.1 ($8.5).

The insurer will acquire the SDB shares by paying 2.69 billion yuan in cash and also inject its banking unit into the Shenzhen-based lender.

Following the deal Ping An will hold a 52.39 percent stake in SDB, the statement said. The purchase, however, is subject to shareholder and regulatory approvals.

"We believe the controlling stake in SDB is just the first step in Ping An's ultimate plan of becoming a financial conglomerate," said Peng Yulong, an analyst with Guotai Junan Securities.

The insurer expects its banking business to account for 30 percent of the overall revenue, while insurance and asset management would be around 40 and 30 percent respectively, said Ping An Chairman Ma Mingzhe.

"The next focus is to how to merge SDB with Ping An Bank as they are still separate entities," Peng said.

Yao Jun, secretary of the board at Ping An, said the group expects to complete the integration of both banks in one year.

"Both the banks will take advantage of shared customers, business channels and other resources through strategic cooperation," said Yao.

Ping An Deputy General Manager Yao Bo said the future strategic focus for the SDB and Ping An Bank will be retail banking and small- and medium-sized enterprises financing.

According to Ping An's interim report, the insurer's profit from banking surged more than 90 percent from a year earlier to 1.1 billion yuan in the first half, generating 11 percent of the total net income. SDB contributed 204 million yuan to Ping An's 29 percent profit gain in the first half.

Li Cong, an analyst with Huatai United Securities, said the move will largely improve the synergy of Ping An, especially in the cross-selling sector.

"With Ping An taking the controlling stake in SDB, cross-selling insurance costs will be lower and also help in sales of more complex products," said Li.

Nearly 14 percent of Ping An's non-life insurance premium came from cross-selling channels during the first six months of the year, while non-bank clients contributed 22 percent of the corporate deposits.