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Steven: Ping An to Emerge as Financial Monolith
China Ping An Insurance (2318.HK, 601318.SH) (Ping An) is on its way to becoming a true financial powerhouse by building up its banking business to match revenues with its core insurance and investment units. Since Ping An and Shenzhen Development Bank (000001.SZ) (SDZ) both suspended trading on June 8, Chinese media have been reporting rumors that Ping An intends to spend about RMB 18.1 billion to take more than 20% stake in SDZ through the purchase of new shares and the 16.76% stake held by Newbridge Capital, SDZ's largest shareholder.
Analysts are pretty optimistic, and the deal seems nearly clinched with most people debating only over the manner and final dollar value of the deal. Securities Daily quoted the director of the China Banking Research Center of the Central University of Finance and Economics, Guo Tianyong, as saying that "Ping An has a penchant for the banking business, while Newbridge Capital wants to retreat from SDZ on the condition that it gets a good price."
Even though it's uncertain which brand will survive, Ping An is expected to merge Ping An Bank, which is weaker than many domestic commercial banks, with trans-regional SDZ. Both of the companies are headquartered in Shenzhen and the latest news is that Goldman Sachs and CICC intend to act as financial consultants on the deal for Ping An and Newbridge.
Ping An is already the second-biggest share holder of SDZ, accounting for 4.86% of the bank's total shares, according to SDZ's Q1 financial report.
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Steven Ho covers China's for-profit education and travel sectors.
