DBS Group, a Singaporean multinational financial and banking services corporation, has recently announced acquiring a 13% stake in privately owned Shenzhen rural Commercial Bank for S$1.08 billion. It has been reported that the investment stands to be a part of the financial company’s strategy of expansion in China’s Greater Bay Area.
Report suggests that this 13% stake investment, which forms DBS Group’s biggest acquisition in China, strategically positions the organization to upscale its share in the Shenzhen lender, just after Beijing eased rules on foreign ownership in the financial services sector.
As per official sources, the deal has been potentially approved by the Shenzhen office of China Banking and Insurance regulatory Commission and the Monetary Authority of Singapore. Moreover, it is also likely to reach conclusion following approval by the China Securities Regulatory Commission.
It has been further claimed that upon completion of the transaction, DBS would become the largest stakeholder in Shenzhen Bank and will have representation on the Chinese bank’s board of directors.
Apparently, the DBS Group would acquire 1.35 billion new shares in Shenzhen bank at 3.91 yuan per share, representing 1.01 times the book value per share of the latter organization as at end-Dec 2020.
Commenting on the recent move. Piyush Gupta, CEO at DBS Group, cited that the firm sees this investment as a highly complementary strategic collaboration which would allow them to double down on the Greater Bay Area.
Additionally, the deal is also likely to leverage Shenzhen Bank’s local network and expertise to deepen DBS’ Greater Bay Areas strategy.
Mr. Gupta further mentioned that the company would also be able to support the constant growth and digital transformation of SZRCB via its regional presence and digital capabilities.
The DBS Group has also stated that the novel investment would have an impact of less than 0.2% point on its capital ratios and is estimated to be immediately accretive to return on equity and earnings.