PETALING JAYA – CIMB Group Holdings Bhd is disposing of an 18.21% stake in China’s Bank of Yingkou Co Ltd for 1.507 billion yuan (RM972 million) cash.
In a filing with the stock exchange, CIMB said its subsidiary CIMB Bank Bhd had entered into a share transfer agreement with Shanghai Guozhijie Investment Development Co Ltd for the disposal.
CIMB noted that the disposal price values the stake at about one time the price-to-book value ratio of Bank of Yingkou.
It also inked a long-term collaboration agreement with the Chinese bank for both entities to continue collaborating in areas of staff exchanges, product development, training and sharing of market intelligence.
“This has certainly been one of CIMB’s best investments. Since our entry in 2009, this investment has yielded an internal return rate of 17.4% and a money multiple of 3.3 times. However, capital requirements for minority investments in other banks such as this has continued to increase, so much so that in time, the returns threshold required to justify this investment will be too high,” said CIMB Group CEO Tengku Datuk Seri Zafrul Tengku Abdul Aziz said.
The disposal is in line with CIMB’s T18 operating and capital targets, and plans to focus on the core business in core markets, he added.
“However, I look forward to continuing the strategic collaboration with BYK (Bank of Yingkou) in deepening our understanding of the consumer and commercial banking markets in China, for us to continue to build ‘China expertise’ within our ranks,” he concluded.
From the time of its entry up till the end of September 2016, CIMB shared about RM651 million of Bank of Yingkou’s profits. For the first nine months of 2016, CIMB’s share of these profits was about RM93 million.
The deal is expected to be completed in 2017, pending regulatory approvals.