Ping An Insurance to Merge Its Banking Unit With Shenzhen Development Bank

Ping An Insurance (Group) Co., China’s second-largest insurer, is in talks to merge its banking unit with Shenzhen Development Bank Co. to get around Chinese rules barring insurers from controlling more than one lender.

Ping An Bank Co. and Shenzhen Development Bank, both based in the southern city of Shenzhen, are working on an “unprecedented major restructuring,” according to announcements from the companies late yesterday. Shares of Ping An Insurance and Shenzhen Development Bank were suspended today.

Combining Ping An Bank and Shenzhen Development Bank would give Ping An Insurance control of a lender with 809 billion yuan ($119 billion) of total assets and help it avoid falling foul of regulations barring insurers from exerting power over two banks. Ping An Insurance is buying a 29.99 percent stake in Shenzhen Development Bank.

“You don’t want to pitch your own units against each other,” said Luo Yi, a Shenzhen-based analyst at China Merchants Securities Co. who has a “strong buy” rating on the insurer’s stock. “The merger would extend Ping An’s reach in the banking market and broaden its customer base.”

Ping An Insurance last month bought 520.4 million shares in Shenzhen Development Bank from Newbridge Capital LLC for about 11.45 billion yuan, making it the lender’s largest shareholder. The insurer this week won approval to buy as many as 379.58 million new shares in Shenzhen Development Bank in a private placement valued at 6.93 billion yuan.

Shenzhen Development Bank last month appointed Richard Jackson, former head of Ping An Bank, as its president.

The deal may extend Ping An Chairman Peter Ma’s push to build a one-stop financial supermarket deriving two-thirds of revenue from non-insurance products in about 10 years. Ping An Insurance, part owned by HSBC Holdings Plc, shifted its focus to the domestic market after losing $3.3 billion on an investment in Fortis, formerly Belgium’s biggest financial-services company, in 2008.

Shenzhen Development Bank fell 5.3 percent yesterday to close at 17.51 yuan, taking this year’s decline to 28 percent. Ping An Insurance slipped 1.5 percent to 46.81 yuan yesterday, for a 15 percent drop in Shanghai this year.

--Luo Jun, Zhang Dingmin. Editors: Andreea Papuc, Philip Lagerkranser

To contact Bloomberg News staff of this story: Luo Jun in Shanghai at +8621-6104-7021 or jluo6@bloomberg.net

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