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Ping An, SDB discuss banks tie-up

By Luo Jun and Zhang Dingmin (China Daily)
Updated: 2010-07-01 10:00

Ping An, Shenzhen Development Bank working on 'unprecedented major restructuring'

SHANGHAI - Ping An Insurance (Group) Co, China's second-largest insurer, is in talks to merge its banking unit with Shenzhen Development Bank Co to get around Chinese rules barring insurers from controlling more than one lender.

Combining Ping An Bank and Shenzhen Development Bank would give Ping An Insurance control of a lender with 809 billion yuan ($119 billion) of total assets. [LIN QING / FOR CHINA DAILY]

Ping An Bank Co and Shenzhen Development Bank, both based in the southern city of Shenzhen, are working on an "unprecedented major restructuring", according to announcements from the companies late on Tuesday. Shares of Ping An Insurance and Shenzhen Development Bank were suspended on Wednesday.

Combining Ping An Bank and Shenzhen Development Bank would give Ping An Insurance control of a lender with 809 billion yuan ($119 billion) of total assets and help it avoid falling foul of regulations barring insurers from exerting power over two banks. Ping An Insurance is already in the process of buying a 29.99 percent stake in Shenzhen Development Bank, which was the nation's first overseas-controlled lender.

Related readings:  Ping An Insurance to merge its banking unit with SDB  7 Ping An execs join SDB board  Ping An gets regulatory approval on Shenzhen bank deal  Shenzhen bank sees net profits up 700%

"You don't want to pitch your own units against each other," said Luo Yi, a Shenzhen-based analyst at China Merchants Securities Co who has a "strong buy" rating on the insurer's stock. "The merger would extend Ping An's reach in the banking market and broaden its customer base."

Ping An Insurance currently serves 51 million retail customers and 2 million corporate clients nationwide, according to its website. Shenzhen Development Bank's network of over 300 outlets will allow the insurer to better serve its customers whose average age is below 40 and whose assets will grow in the coming two decades, Ping An President Louis Cheung said a year ago when agreeing to buy a stake in the Chinese bank from Newbridge Capital LLC.