DBS buys 13 per cent stake in Shenzhen Rural Commercial Bank for US$814 million as it ‘doubles down’ on bay area

Chad Bray
·3-min read

DBS has agreed to buy a 13 per cent stake in Shenzhen Rural Commercial Bank Corp (SZRCB) for 5.29 billion yuan (US$814 million) as it becomes the latest lender to seek to expand further in the Greater Bay Area.

Singapore’s biggest bank will acquire 1.35 billion new shares in the privately owned commercial lender at 3.91 yuan a share, representing 1.01 times the book value of the company’s shares as of December 31, DBS said.

Following the deal, DBS will be the bank’s largest shareholder and have representation on its board of directors.

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“We see this as a highly complementary strategic partnership that will allow us to double down on the GBA [Greater Bay Area] and leverage [Shenzhen Rural Commercial Bank’s] local network and know-how to deepen DBS’ GBA strategy,” DBS’ chief executive officer Piyush Gupta said in a stock exchange filing. “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.”

The deal strategically positions DBS to increase its stake in the Shenzhen lender after China eased rules on foreign ownership in the financial services sector, the bank said.

The investment has been approved by the Monetary Authority of Singapore and the Shenzhen office of the China Banking and Insurance Regulatory Commission and is expected to be completed following approval by the China Securities Regulatory Commission.

Founded in 2005, Shenzhen Rural Commercial Bank operates one of the largest branch networks in Shenzhen and employs more than 3,600 people. The lender reported a net profit of 4.8 billion yuan in 2020 and had total assets of 519 billion yuan as of the end of last year, according to DBS.

The bay area has a population of more than 72 million people and had a gross domestic product of US$1.7 trillion as of the end of 2019, the equivalent of the Russian or South Korean economies.

Banks are rapidly moving to add staff and increase their presence in the planned economic hub as China eases rules to expand the flow of capital and people as it further integrates Hong Kong, Macau and nine cities in Guangdong Province.

HSBC said in February that it would invest US$3.5 billion and hire more than 5,000 people in its wealth management business in Asia as it seeks to tap rising affluence in the region, particularly in the bay area. The bank is investing US$6 billion in total in Asia over the next five years.

Standard Chartered said in March it wants to triple its income from the bay area over the next five years and plans to increase its headcount in the mainland Chinese cities in the zone from 1,400 to 2,500 by 2023.

Citigroup said in March it plans to hire up to 1,700 people across its businesses in Hong Kong as it seeks to tap increasing capital flows between the city and mainland China and target rising wealth in the bay area.

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