China's securities regulator has given the go-ahead to Shenzhen Rural Commercial Bank's (SZRCB) private placement, in which Singapore's biggest bank will take a major stake, marking the first foreign strategic investment in a small or midsize Chinese bank through a private placement in more than a decade.
On June 22, the China Securities Regulatory Commission approved the Shenzhen lender's sale of about 1.96 billion new shares, it said in a statement. The lender is poised to sell 1.35 billion of the shares to DBS Bank for 5.29 billion yuan ($819 million) under a deal in which the Singaporean bank will hold a 13% stake, making it SZRCB's largest shareholder. The deal got the nod from China's banking regulator in April.
The last such foreign investment in a small or midsize Chinese bank was the purchase of an 18% stake of Bank of Jilin by South Korea's KEB Hana Bank in 2010. The DBS investment in SZRCB is expected to give it a greater presence in China's Greater Bay Area.
China aims to make a world-leading economic and innovation hub out of the bay area, which consists of Hong Kong, Macao and nine Guangdong Province cities. The area encompasses some of the country's most dynamic cities, noted for their strong financial services and high-tech manufacturing capabilities. In 2018, the area accounted for 5% of China's population but generated more than 11% of its gross domestic product, surpassing that of South Korea, according to Caixin's calculation based on official data.
"We see this as a highly complementary strategic partnership that will allow us to double down on the [Greater Bay Area] and leverage SZRCB's local network and know-how," Piyush Gupta, CEO of DBS, said in a statement in April.
"At the same time, we would be able to support the continued growth and digital transformation of SZRCB through our regional presence and digital capabilities," Gupta said.
Established in 2005, SZRCB runs one of the most extensive bank networks in Shenzhen, financing mainly small and midsize businesses, with 210 branches in the city. As of the end of last year, the bank had 519 billion yuan in total assets, making it the third-largest rural bank in wealthy Guangdong Province. The bank reported 4.8 a net profit of billion yuan in 2020. With more than 5 million active retail customers, and more than 170,000 active corporate clients, the bank had 404 billion yuan of deposits at the end of last year.
DBS had 646 billion Singapore dollars ($481.6 billion) in total assets at the end of 2020, making it the largest bank in Southeast Asia. It posted SG$14.6 billion of revenue in 2020 and a net profit of SG$4.7 billion. It opened a representative office in Beijing in 1993 and set up DBS Bank (China) in Shanghai in 2007.
Last August, DBS received regulatory approval to set up a majority-owned securities joint venture in China, following UBS, Goldman Sachs, Morgan Stanley, and Credit Suisse. The venture commenced business operations in June.
Additional reporting by Han Wei and Peng Qinqin.
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