China Everbright Units’ Shares Jump on Plans to Revamp Ownership

China Everbright Ltd. shares jumped the most since 2011 on its parent’s plans for an ownership revamp of a group with $420 billion of assets from banking and broking to tourism.

The stock advanced 12 percent to HK$13.20 at 11:59 a.m in Hong Kong. Shares of China Everbright Bank Co., the banking unit, jumped as much as 6.8 percent in Shanghai and 4.4 percent in Hong Kong. Everbright Securities Co., based in Shanghai, rose as much as 5.1 percent. China Everbright Ltd. owns stakes in the lender and the brokerage.

China Everbright Group Ltd. will become a joint stock company instead of a “state-wholly-owned enterprise,” the China Everbright Ltd. unit, said Aug. 1. As the ruling Communist Party pledges a bigger role for markets in the economy, makeovers for government businesses have included Citic Group -- China’s first state-owned investment corporation -- shifting assets into a Hong Kong-listed unit.

“Using Citic’s experience as a guide, we expect Everbright Group will start the process of listing once the ownership revamp is complete,” Li Yamin, a Shanghai-based analyst at Ping An Securities Co., wrote in a note today.

The Ministry of Finance and Central Huijin Investment Ltd., the sovereign investor that controls China’s largest banks, will jointly own the revamped Everbright Group. China Everbright Group’s direct interest in Everbright Bank will likely increase to 24 percent from about 8 percent, according to Li.

One benefit may be better integrating the group’s range of financial-services operations, according to Li.

Citic’s Move

“The revamp will put straight the relationships between the group and its units,” Zhang Yanbing, a Shanghai-based analyst at Zheshang Securities Co., said by phone. “Decision-making at companies such as Everbright Bank will become more efficient.”

Signs of momentum in restructuring state businesses since President Xi Jinping was installed as the head of the Communist Party in 2012 have included a $36 billion deal in April to shift assets from Citic Group to its main Hong Kong-listed unit.

In the latest plan, China Everbright Group Ltd. will become China Everbright Group Corp., according to the Hong Kong unit’s statement. The finance ministry’s contribution to the new entity will be the stakes that it holds in China Everbright Group Ltd. and China Everbright Holdings Co., plus the principal and interest of credit already extended, the statement said.

Huijin’s Stakes

Huijin’s capital contribution will comprise the 9 billion shares it owns in Everbright Bank, its stake in China Everbright Industrial (Group) Co. and the principal and interest of loans extended by the central bank, according to a statement by Everbright Bank.

Set up in 1983, the unlisted China Everbright Group had 2.6 trillion yuan ($420 billion) of assets last year, pre-tax profits of 37 billion yuan and almost 50,000 employees, according to its website. The banking unit alone had 2.4 trillion yuan of assets by December and 26.7 billion yuan of profit in 2013, according to China Everbright Bank’s annual report.

— With assistance by Aipeng Soo, and Jun Luo

Before it's here, it's on the Bloomberg Terminal.