BOC Hong Kong Said to Weigh Sale of Nanyang Commercial Bank

BOC Hong Kong Holdings Ltd., controlled by China’s fourth-largest lender, is considering a sale of its Nanyang Commercial Bank Ltd. unit, people with knowledge of the matter said.

BOC Hong Kong has been sounding out potential buyers of the Hong Kong-based lender, one person said, asking not to be identified because the discussions are confidential. No decision has been made on pursuing a sale, the people said.

Nanyang had 42 branches in Hong Kong and 14 in China at the end of 2013, with HK$280.4 billion ($36 billion) of consolidated assets, according to its annual report. In December last year, Moody’s Investors Service cut the bank’s rating, citing concerns about rising bad-loan risks from its rapid mainland expansion.

BOC Hong Kong will make “very substantial progress in improving its mainland credit quality,” if it proceeds with a sale, Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd., said by e-mail. It would also have extra money to meet rising capital requirements in Hong Kong, he said.

BOC Hong Kong said it’s conducting a review of operations and its assets portfolio that may lead to the sale of certain banking assets, according to a statement to Hong Kong stock exchange. The bank didn’t give details of the potential disposal.

Cross-Border

A deal would add to the $6.8 billion of bank acquisitions completed in the city last year, data compiled by Bloomberg show. Nanyang offers a foothold in the Chinese banking hub as Hong Kong’s role in cross-border financing expands.

BOC Hong Kong runs branches in the city under its own name, as well as through units Nanyang and Chiyu Banking Corp. Moody’s lowered Nanyang’s long-term bank deposit rating to A1 from Aa3 in December.

Some smaller Hong Kong lenders have sought buyers as they face higher capital requirements and pressure from larger rivals. Yue Xiu Group, an investment arm of southern China’s Guangzhou city, completed its $1.5 billion acquisition of Chong Hing Bank Ltd. in February last year. Oversea-Chinese Banking Corp., Southeast Asia’s second-largest lender by assets, bought Wing Hang Bank Ltd. for about $5 billion.

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