KUALA LUMPUR: CIMB Bank Bhd is selling its 18.21% stake in the Bank of Yingkou Co., Ltd for 1.507 billion renminbi (RM972mil), valuing the stake at about one time the price to book value ratio.
CIMB Group Holdings Bhd said on Friday the bank has signed a share transfer agreement with with Shanghai GuoZhiJie Investment Development to divest the stake, comprising 391.39 million shares in BYK.
“The proposed divestment does not have any material effect on CIMB’s consolidated net assets and earnings, and does not have any effect on CIMB’s share capital and substantial shareholders’ shareholdings for the financial year ended Dec 31, 2015,” it said.
Group chief Executive of CIMB Group Tengku Datuk Seri Zafrul Aziz said that its stake in Bank of Yingkou “has certainly been one of CIMB Group’s best investments”.
“Since our entry in 2009, this investment has yielded an IRR (internal rate of return) of 17.4% and a money multiple of 3.3 times. However, capital requirements for minority investments in other banks such as this has continued to increase, so much so that in time, the returns threshold required to justify this investment will be too high,” he explained.
Zafrul added this disposal was also in line with CIMB’s T18 operating and capital targets, and its plans to focus on its core business in our core markets.
From the time of its entry up till the end of September 2016, the CIMB Group had shared about RM651mil of Bank of Yingkou’s profits. For the first nine months of 2016, CIMB’s share of these profits was approximately RM93mil.
CIMB said this all-cash transaction is subject to regulatory approvals including that of the Chinese Banking Regulatory Commission and it is expected to be completed in 2017.
CIMB Group also signed a long term collaboration agreement with Bank of Yingkou for both entities to continue collaborating in areas of staff exchanges, product development, training and sharing of market intelligence.
CIMB said Bank of Yingkou was set up in April 1997 through an amalgamation of city credit cooperatives in Yingkou City, Liaoning Province, China.
The bank has been the leading commercial bank in Yingkou City and it expanded throughout the Liaoning Province and in Harbin with more than 100 branches.
As for Shanghai Guozhijie Investment Development, which was established in 1999, it has businesses spread across financial services, real estate development, retail, technology and renewable energy.
It has a 52.44% stake in Anxin Trust Co., Ltd., a financial trust company listed on the Shanghai Stock Exchange.
Its real estate development activities includes the development of office buildings, hotels, shops, residential property and property management services across Beijing, Shanghai, Hangzhou, Chengdu and Kunming. Its retail business is carried out through the Holiday Department Store brand.