London-based banking group HSBC is set to double its stake in Ping An, China's second-largest insurance company, after agreeing to pay $1.1 billion for an additional 9.9% of the company's share capital.
HSBC Insurance Holdings Limited, a wholly-owned subsidiary of the HSBC Group, will increase its total stake in Shenzhen-based Ping An to 19.9%, the maximum share available to a foreign company according to current legislation in China. The UK bank will acquire the shares courtesy of deals with investment banks Goldman Sachs and Morgan Stanley.
Although HSBC is already the largest foreign bank in mainland China, it continues to target opportunities in this growing market. HSBC bought an 8% stake in Bank of Shanghai in 2001 and then paid $1.75 billion for a 20% interest in China’s Bank of Communications last year.
The transactions are subject to certain conditions including obtaining approval from the China Insurance Regulatory Commission and other approvals as required by PRC regulators. HSBC intends to satisfy the consideration for the shares out of internal resources.
HSBC chairman Sir John Bond said that the company was optimistic about the long-term prospects of the insurance industry in China. HSBC believes that Ping An is well positioned to benefit from the sector’s development.