Wing Hang Bank Ltd. (302) surged by a record in Hong Kong trading, leading shares in the city’s family-owned lenders higher after becoming the second one to say its shareholders are in talks to sell their stake.
The stock jumped 39 percent, the biggest gain since it started trading in 1993, to close at HK$116.80. Owners including members of Chairman Patrick Fung’s family and related trusts are holding preliminary talks for a sale that would trigger a mandatory buyout offer, the bank said in a filing to Hong Kong’s stock exchange yesterday.
Wing Hang joins Chong Hing Bank Ltd. (1111) in acquisition talks as Hong Kong’s role as an international yuan center attracts Chinese financial institutions that are seeking to expand abroad. 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.
“As long as buyers see Hong Kong as a regional hub with a promising future because of the yuan business and integration with China, they will be interested in Hong Kong banks,” Dominic Chan, an analyst at BNP Paribas SA, said by phone today. “Wing Hang is a well-run bank, with a strong geographic presence in Hong Kong, Macau and the mainland.”
No definitive terms have been set in the talks, according to yesterday’s statement. The family, its affiliates and BNY International Financing Corp. together hold about 45 percent of the shares, which would require a buyout bid, the bank said in the statement.
Today’s gain added about HK$10 billion ($1.3 billion) to Wing Hang’s market value, bringing it to about HK$36 billion. Earlier Hong Kong bank acquisitions have been valued at an average 1.9 times book value, which would give a price of HK$126 a share, or $5 billion, for Wing Hang, UBS AG analyst Stephen Andrews wrote in a note.
Founded in 1937 as a moneychanger in Guangzhou by Patrick Fung’s father, Fung Yiu-king, Wing Hang was re-established in Hong Kong after World War II and granted a banking license in 1960, according to its website.
The lender earned 58 percent of last year’s pretax profit from retail operations, including credit cards, mortgages and personal loans, data compiled by Bloomberg show. Corporate banking, including trade finance and loans to small and medium-sized companies, accounted for another 15 percent.
Chong Hing, Hong Kong’s smallest family-run lender, climbed 3.3 percent to HK$32.75, closing at the highest level since its market debut 19 years ago. That added to a 10 percent gain yesterday after the Oriental Daily newspaper reported that the sale of a stake may be decided this week.
Hong Kong’s other family-run banks also rose. Dah Sing Banking Group Ltd. (2356) jumped 18 percent, the biggest gain since its shares started trading in 2004. Bank of East Asia Ltd., the largest family-controlled lender, advanced 5.7 percent to HK$33.55, the highest close since June 2011, valuing it at about HK$77 billion. The banks aren’t aware of any reasons for the increase and have nothing to announce, they said in separate statements to the stock exchange.
“Wing Hang is more attractive than Chong Hing and Dah Sing because of its track record in return on equity” and its market share in deposits, Grace Wu, an analyst at Daiwa Capital Markets Hong Kong Ltd., said by phone today. “Wing Hang also has a more balanced geographic presence in Hong Kong, Macau and the mainland.”
Wing Hang had 43 outlets in Hong Kong, 15 in mainland China and 12 in Macau at the end of June, compared with Chong Hing’s 51 in its home market and one each in the other territories, according to the banks’ websites.
China Life Insurance Co. (2628) may bid for Wing Hang, the Oriental Daily newspaper reported today, citing market sources that it didn’t identify. Two phone calls to the board secretary’s office at the insurer went unanswered.
“The small and medium-sized banks of Hong Kong will need to get a mainland partner so that they can tap the growth opportunities in the cross-border yuan businesses,” Wu said.
Chong Hing said in a statement yesterday it’s still in discussions with interested parties including Yue Xiu Group, and the timing of any transaction is uncertain. Yue Xiu is the trading arm of the Guangzhou city government.
Dah Sing doesn’t rule out participating in an acquisition as either a buyer or a target, Chief Executive Officer Harold Wong said last month.
China Merchants paid $4.7 billion for the Wu family’s Wing Lung Bank Ltd. in a deal completed in 2009.
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