Commonwealth Bank of Australia (CBA) has signed a deal to sell a 10% stake in China’s Bank of Hangzhou (HZB) for $1.31bn (A$1.8bn).

CBA’s stake in HZB will be acquired by Hangzhou Urban Construction & Investment Group and Hangzhou Communications Investment Group.

Both the entities are majority-owned by the Hangzhou Municipal Government. 

The Australian lender, which originally invested in HZB in 2005, will retain its remaining 5.57% stake in the Chinese bank until at least 28 February 2025.

CBA’s decision to dilute its shareholding in HZB is part of its strategy to focus on its core operations in Australia and New Zealand.

CBA CEO Matt Comyn said: “Our collaboration has seen HZB become a significant player in retail, wealth management and commercial banking across the Yangtze Delta region. The reallocation of part of our shareholding to local partners will support the further expansion of HZB.

“Our ongoing shareholding in HZB following completion of the transaction will enable us to continue to support its development as one of China’s leading city commercial banks, and complement our relationships in the region.”

The deal is subject to several customary closing conditions and is expected to close in the middle of 2022.

HZB chairman Chen Zhenshan said: “The over ten years of strategic cooperation between HZB and CBA have witnessed HZB’s rapid development and growing market influence.

“HZB understands and respects the decision of CBA to reduce its shareholding based on its own strategic considerations and capital allocation needs. In the future, the two parties will continue to cooperate and maintain a strong partnership.”