DBS is buying a 13% stake in Shenzhen Rural Commercial Bank (SZRCB) for $814m (RMB5.29bn), which will make DBS the largest shareholder in the latter.
The deal sees DBS purchasing 1.35 billion new shares in Shenzhen-based SZRCB at RMB3.91 apiece.
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DBS will have representation on SZRCB’s board after the deal is finalised.
It will finance the deal with internal cash resources and expects the deal to be immediately accretive to earnings as well as return on equity.
The Singaporean lender also expects less than 0.2 percentage points impact to its capital ratios as a result of the transaction.
The deal has already received the clearance of the Monetary Authority of Singapore and China Banking and Insurance Regulatory Commission, Shenzhen Office.
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By GlobalDataIt now awaits the nod of China Securities Regulatory Commission.
The transaction aligns with DBS’ plan of investing in its core markets. China is one of the bank’s six core markets.
The deal enables DBS to grow in the Greater Bay Area (GBA) through Shenzhen, which is considered GBA’s fastest growing city with the highest GDP.
A total of 210 of SZRCB’s 217 branches and over 2,100 self-service terminals are located in Shenzhen.
The privately-owned commercial bank, set up in 2005, has a workforce of over 3,600.
It caters to more than five million active retail customers and over 170,000 active corporate customers. Around 40% of its total loans are in the retail segment while 60% are in the corporate segment.
The bank had RMB519bn in assets at the end of December 2020.
Commenting on the deal, DBS CEO Piyush Gupta said: “We see this as a highly complementary strategic partnership that will allow us to double down on the GBA and leverage on SZRCB’s local network and know-how to deepen DBS’ GBA strategy.
“At the same time, we would be able to support the continued growth and digital transformation of SZRCB through our regional presence and digital capabilities.”
Several banks are now grappling for space in China’s financial market as the country liberalises the sector to boost competition.
Among them is HSBC, who earlier this year announced plans to increase its focus on high-growth markets in Asia.
Greater China was one of the markets, which the bank identified as key drivers of its future growth. In Mainland China, it intends to scale digital hybrid mobile wealth planning for wealthy clients through the hiring of 3,000 wealth managers.
