PSBC kick-starts plan to boost coffers
Bank brings in 10 strategic investors to augment capital ahead of possible public float
Postal Savings Bank ofChina Corp Ltd, the sixth-largest commercial lender in China by assets, said onWednesday that the China Banking Regulatory Commission has approved the bank’s plan to raise as much as 45.1 billion yuan ($7 billion) from 10 strategic foreign and domestic investors ahead of a possible initial public offering.
The lender said it will sell a 16.92 percent stake to a group of investors, rangingfromglobal financial institutions to domestic Internet giants, upon completion of fund-raising.
With this, PSBC has also changed its corporate governance structure by switching from a single shareholder to multiple shareholders. Till date, China Post Group, the country’s official postal service, is the sole investor in the lender.
“PSBC will optimize its corporate governance mechanism to improve the efficiency and quality of operations… We’ll also take active measures to make a business transition, as the traditional business model of Chinese banks is facing challenges from interest rate liberalization, the internationalization of renminbi and intensified competition with online financial service providers,” said Lyu Jiajin, president of the bank.
Among the new strategic investors are: Swiss financial services company UBS AG, United States investment bank JPMorgan Chase & Co, Singapore’s sovereign wealth fund Temasek Holdings Pte, Chinese telecom firm China Telecom Corp Ltd, Internet giant Tencent Holdings Ltd and Ant Financial Services Group, the Internet finance affiliate of Alibaba Group Holding Ltd.
PSBC said it would use the money from the stake sale to augment its capital base. Some of the investments will be made in US dollars, thus helping the bank develop its international business and support the global expansion of Chinese companies, said Lyu.
The strategic investors, however, will not hold a large stake in PSBC. Singaporebased DBS Bank Ltd has agreed to invest approximately 1.55 billion yuan to acquire less than 1 percent stake in the bank. China Life Insurance Co Ltd will hold no more than 5 percent of the bank’s enlarged issued share capital.
Lyu said PSBC hopes to accelerate the upgrade of its retail business, the expansion of its corporate business and the innovation of its financial market business by learning from the experience and technologies of investors like UBS and JPMorgan.
It also looks forward to strengthening its strategic layout in areas like Internet finance and inclusive finance by drawing on the expertise and influence of investors like Ant Financial and Tencent.
“We have made a package of plans for cooperation in terms of channel expansion, client discovery, product innovation, risk management, technical support and human resources development,” he said.
Zeng Gang, director of banking research at the Institute of Finance and Banking at the Chinese Academy of Social Sciences, said PSBC move is seen as a precursor to its preparation for an IPO.
“By introducing multiple strategic investors, the bank will establish a modern, commercialized corporate governance mechanism. The capital injection will help the bank sustain rapid growth, which is hard to achieve with a single investor.”
Nicolas Aguzin, CEO for JPMorgan, Asia Pacific, said: “Through our partnership with PSBC, we are reasserting our long-term commitment to China, a market where we see tremendous growth potential. We believe the country’s financial market reforms will underpin future economic development while also contributing to greater economic stability.”