CBA chief executive Matt Comyn is nearing another milestone in his strategic program to simplify the group’s banking portfolio after negotiating a deal to offload most of the bank’s interest in booming Chinese deposit taker, the Bank of Hangzhou (BoH).
The sale, which is subject to approval from Chinese regulators, will see CBA receive around $A1.8 billion for passing a 10 per cent stake in the BoH to investment companies controlled by a Chinese government authority.
If the deal completes, CBA will be required to retain a residual 5.57 per cent interest in the Chinese bank until at least the end of February 2025.CBA’s ASX-listed scrip rallied strongly after the announcement and closed up A$1.36 or 1.5 per cent to $94.82.
In a statement filed to the ASX CBA indicated that the transaction would trigger a capital release that would enhance the group CET 1 ratio by around 35 basis points.
However, CBA’s ability to expedite the sale is now mostly in the hands of China’s super financial regulator – the Banking and Insurance Regulatory Commission.
The Australian bank has encountered several delays on getting big transactions approved by the Chinese regulator in recent years, most notably the sale of its stake in BoCommLife to Japan’s Mutsui Sumitomo.
While the BoCommLife deal was originally announced in May 2018, CBA did not secure the green light from regulatory commission until 31 months later.
CBA yesterday indicated that the BoH deal was expected to be approved by around the middle of this year, but its guidance on timing was qualified.
“Completion of the Transaction is subject to a number of customary conditions including regulatory approval from the China Banking and Insurance Regulatory Commission, receipt of a confirmation opinion from the Shanghai Stock Exchange and registration of the share transfer by China Securities Depository and Clearing Corporation Limited,” CBA told the ASX.
“The completion of the Transaction is currently expected to occur around the middle of calendar year 2022.”
Since Comyn took the reins of CBA in January 2018, the group has moved aggressively to reduce its strategic exposure to financial services markets throughout Asia.
Apart from the BoCommLife sale, the bank has also offloaded a string of Asian operations including the Indonesian insurance arm, its Colonial wealth management network and a Vietnamese banking subsidiary.
CBA retains ownership of retail banking network in Indonesia and a minority stake in another Chinese bank, Qilu Bank.
The sale of the 10 per cent interest in the Bank of Hangzhou is expected to generate an after-tax capital gain of $340 million.