Commonwealth Bank of Australia (CBA) has agreed to divest a 10% stake in China-based Bank of Hangzhou (HZB) for a total consideration of around A$1.8bn ($1.31bn).
Hangzhou Municipal Government, through its majority-owned entities Hangzhou Urban Construction & Investment Group and Hangzhou Communications Investment Group, will buy the CBA’s stake in HZB.
The Australian lender will retain its remaining stake of around 5.57% in HZB until February 2025, even if the transaction potentially terminated before its closing.
HZB chairman Chen Zhenshan said: “The over ten years of strategic cooperation between HZB and CBA have witnessed HZB’s rapid development and growing market influence.
“CBA has also achieved a good return on investment, which is a win-win outcome for both parties. HZB understands and respects the decision of CBA to reduce its shareholding based on its own strategic considerations and capital allocation needs.”
The transaction is expected to close in mid-2022, subject to certain customary conditions including regulatory approval from the Chinese regulatory authorities.
In addition, the deal is subject to receipt of a confirmation opinion from the Shanghai Stock Exchange and registration of the share transfer by China’s central securities depository.
Upon closing, the transaction is estimated to result in a tax benefit of around A$340m for CBA, along with an increase in its CET1 ratio by around 35 basis points.
Its remaining 5.57% stake will be considered as a strategic equity investment, with gains and losses recognised within the Statement of Comprehensive Income, said the Australian lender.
CBA CEO Matt Comyn said: “CBA is pleased to have played a meaningful role in HZB’s development since our original investment in 2005.
“Our collaboration has seen HZB become a significant player in retail, wealth management and commercial banking across the Yangtze Delta region. The reallocation of part of our shareholding to local partners will support the further expansion of HZB.
“At the same time, the partial sale of our shareholding is consistent with our strategy to focus on our core banking business in Australia and New Zealand.”
