Chong Hing Bank Jumps to 16-Year High as Bidders Approach

Chong Hing Bank Ltd., Hong Kong’s smallest family-run lender, jumped to a 16-year high after potential buyers approached the bank and its parent company.

Shares of Chong Hing rose 18 percent to HK$26.50 as of 11:17 a.m. in Hong Kong trading. That’s the highest since July 15, 1997. Liu Chong Hing Investment Ltd. (194), the parent company, jumped as much as 23 percent, the most since it was listed in 1990. The city’s benchmark Hang Seng Index gained 0.8 percent.

Independent third parties have approached the controlling shareholder of Liu Chong Hing about the possible purchase of interests in Chong Hing Bank, the companies said in a joint statement yesterday. Yue Xiu Group, a trading arm of China’s Guangzhou city government, is considering a bid for Chong Hing, according to a person familiar with the matter.

“Chong Hing has been relatively conservative compared with rivals and its lending and fee businesses haven’t grown as much as the other banks’,” Patrick Pun, director of global investment strategy of Haitong International Securities Group Ltd. (665), said by phone today. “With the introduction of a new shareholder, this may hopefully bring in new synergy or a more aggressive strategy at the bank.”

Photographer: Jerome Favre/Bloomberg

The Chong Hing Bank Ltd. logo is displayed outside the bank's headquarters in Hong Kong. Close

The Chong Hing Bank Ltd. logo is displayed outside the bank's headquarters in Hong Kong.

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Photographer: Jerome Favre/Bloomberg

The Chong Hing Bank Ltd. logo is displayed outside the bank's headquarters in Hong Kong.

The founding Liu family held about 60 percent of Chong Hing at the end of December, according to the bank’s annual report. The stake is valued at about HK$6.9 billion ($890 million) based on today’s price.

The controlling shareholder and Liu Chong Hing haven’t yet entered into any agreements with the potential buyers and will make further announcements as necessary, according to the statement. The companies didn’t identify the potential buyers.

Mounting Speculation

Chong Hing Chief Executive Officer Lau Wai-man said in March that the lender was open to proposals from prospective buyers for all or part of the bank. Takeover speculation has mounted since November, when Lau became the first CEO from outside the founding Liu family.

The lender, founded in 1948 by Liu Po-shan, dropped the Liu family name from Liu Chong Hing Bank Ltd. (1111) in December 2006 to “more accurately reflect the public nature of the bank,” according to its website. Lau replaced Liu Lit-chi, a member of the founding family who spent more than 50 years at the bank.

First-half net income at Chong Hing rose 6.4 percent from a year earlier to HK$276 million, the bank said in a filing yesterday.

Family Banks

“Small and medium-sized banks in Hong Kong are facing intense competition from the larger players,” Pun said. “The market views acquisition stories of small and medium-sized banks positively as they see this as the only way out for the smaller banks.”

The number of publicly traded family-run banks in Hong Kong has fallen to four from six more than a decade ago after the industry drew buyers including China Merchants Bank Co., which paid $4.7 billion in 2009 for the Wu family’s Wing Lung Bank Ltd.

Chong Hing trades at about 1.5 times its book value, data compiled by Bloomberg show. That compares with 1.1 times at Bank of East Asia Ltd. (23), the largest family-run bank in the city.

To contact the reporter on this story: Stephanie Tong in Hong Kong at stong17@bloomberg.net

To contact the editors responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net; Chitra Somayaji at csomayaji@bloomberg.net

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