OCBC has been studying an offer for the Hong Kong-based bank for more than two weeks, one of the people said, asking not to be named as the information is private. Wing Hang rose 2.5 percent in Hong Kong today, giving it a market value of HK$36 billion ($4.6 billion).
Two of Hong Kong’s four remaining family-owned banks, squeezed by competition from larger lenders like HSBC Holdings Plc (5), are in talks with potential acquirers seeking to profit from China’s efforts to increase global use of the yuan. Chong Hing Bank Ltd. shares were suspended from trading today, after Bloomberg News reported Yue Xiu Group was nearing an agreement to buy the lender.
“I suppose the reason why they would be doing it is as a gateway into China,” Matthew Smith, an analyst at Macquarie Capital Securities Singapore Pte, said of OCBC. Chief Executive Officer Samuel Tsien “is pretty keen on the market there.”
Wing Hang said Oct. 16 its shareholders remain in talks with unidentified third parties and it hasn’t agreed on definitive terms. The stock trades at 1.76 times book value after this year’s 45 percent rally, according to data compiled by Bloomberg. The shares rose the most since Sept. 19 today.
Chairman Patrick Fung’s family, its affiliates and Bank of New York Mellon Corp. together hold about 45 percent of the shares. A spokeswoman for OCBC declined to comment. Cherry Yung, a Hong Kong-based spokeswoman for Wing Hang, didn’t immediately reply to a call and an e-mail.
United Overseas Bank Ltd., OCBC’s smaller Singaporean competitor, made an initial offer for Wing Hang, though the companies aren’t currently in talks, people with knowledge of the matter said. A spokeswoman for UOB declined to comment.
Agricultural Bank of China Ltd. is considering a bid for Wing Hang, Reuters reported yesterday, citing unidentified people. The Chinese lender doesn’t have overseas acquisition plans, it said in a statement today.
Dah Sing Banking Group Ltd. (2356), another family-owned Hong Kong bank, jumped 10 percent today to a five-year high on takeover speculation. Bank of East Asia Ltd., controlled by the family of Chairman David Li, fell 0.1 percent.
OCBC had a Tier 1 ratio of 14.9 percent as at the end of the second quarter, more than double the regulatory minimum of 6 percent prescribed by the Monetary Authority of Singapore, and S$13.8 billion (11.2 billion) of cash and equivalents. Wing Hang’s Tier 1 ratio was 10.8 percent as of June 30.
Greater China is among markets where OCBC plans to expand, along with Malaysia and Indonesia, according to its website. The bank last month opened its China headquarters in Shanghai’s Pudong business district.
The Singaporean lender bought a stake in Bank of Ningbo Co., based in the eastern Chinese port city, in 2009. The following year, it completed an acquisition of ING Groep NV’s Asian private banking business for $1.45 billion.
Still, its overseas expansion has trailed Singaporean rivals DBS Group Holdings Ltd. and UOB. It earned 29 percent of pretax income outside Singapore last year, compared with 34.3 percent for DBS and 32.8 percent for UOB, data compiled by Bloomberg show.
In August, DBS ended a bid to buy PT Bank Danamon Indonesia for $6.5 billion, which would have been Southeast Asia’s largest-ever banking takeover, after failing to win regulatory approval for a majority stake.
DBS purchased Hong Kong’s Dao Heng Bank Group Ltd. for $5.4 billion in 2001, valuing it at 3.33 times book value. Some analysts at the time criticized DBS for overpaying. Nine years after the acquisition, the bank booked a goodwill impairment loss of S$1.02 billion at its Hong Kong unit.
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