LONDON (Alliance News) - Hang Seng Bank, a 62% indirectly held subsidiary of HSBC Holdings PLC, is to sell a stake of up to 5% in Industrial Bank Co Ltd, in a move to raise up to CNY12.73 billion, about GBP1.34 billion, before expenses for the subsidiary that will leave it with a stake of about 5.87% if all shares are sold.
According to a statement published by HSBC, Hang Seng acquired shares in Industrial Bank for CNY1.7 billion in 2004, when it held a 15.98% stake in the bank before being diluted on Industrial Bank's listing in Shanghai. Hang Seng then spent CNY2.3 billion on shares in a 2010 rights issue, before being diluted in early 2013 due to a private placement by Industrial Bank. Prior to Tuesday's placing, Hang Seng held about 10.87% of Industrial Bank.
An estimated net gain of HKD2.8 billion will be booked by Hang Seng on the sale of the shares, to be recognised in the 2015 financial year.
"The bank considers that the transaction represents an opportunity to realise part of its investment in Industrial Bank, taking into account the current market conditions in the A share market and the bank's long-term strategic objectives, and to strengthen the bank's regulatory capital position and ability to meet future regulatory requirements," a HSBC statement said, referring to Hang Seng.
"The bank expects to use the net sale proceeds of the transaction principally to support future business expansion and for other purposes as deemed appropriate by the board. As part of the bank's investment strategy and capital management processes, the bank will regularly review its remaining shareholding in Industrial Bank, taking into account the bank's planned future business growth, regulatory requirements, market conditions and delivery of sustainable long-term value to shareholders," the statement added.
Industrial Bank is a commercial and retail lender in mainland China. Hang Seng is Hong Kong's second largest bank.
HSBC shares were down 1.4% at 602.00 pence on Tuesdsay.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
Copyright 2015 Alliance News Limited. All Rights Reserved.
HSBC Holdings (HSBA)