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Highlights
- Commonwealth Bank of Australia (CBA) shares gain 1% to AU$159.95 on Tuesday after announcing the sale of its 5.45% stake in Bank of Hangzhou (HZB).
- The sale to New China Life Insurance Co. (NCI) is expected to generate AU$940 million in gross proceeds, with completion anticipated by mid-2025.
- CBA's stock has increased 37% over the past 12 months, reflecting positive investor sentiment.
Shares of Commonwealth Bank of Australia (ASX:CBA) saw a 1% increase on Tuesday morning, reaching AU$159.95. The rise followed news that the banking giant has entered into a binding sale agreement to sell its remaining 5.45% stake in Bank of Hangzhou Co. (HZB), a regional commercial bank based in China.
HZB, which is listed on the Shanghai Stock Exchange, is primarily involved in providing banking and related financial services. CBA’s decision to divest its stake in the Chinese bank is part of its broader strategy to streamline operations and focus on its core banking business in Australia and New Zealand. The deal will see CBA sell its stake to New China Life Insurance Co. (NCI), a Beijing-based life insurance company with listings on both the Shanghai and Hong Kong Stock Exchanges.
The divestment is expected to generate approximately AU$940 million in gross proceeds for CBA. However, the completion of the transaction is contingent upon several conditions, including regulatory approval from China’s National Financial Regulatory Administration, a confirmation opinion from the Shanghai Stock Exchange, and registration of the share transfer with China’s Securities Depository and Clearing Corporation. If all conditions are met, the transaction is expected to close around mid-2025.
Once finalized, the sale is expected to provide a modest 18 basis point increase to CBA’s Common Equity Tier 1 (CET1) ratio, based on the bank's risk-weighted assets as of September 30, 2024. This will further strengthen the bank’s capital position.
CBA’s CEO, Matt Comyn, commented on the agreement, highlighting that the bank has been a long-term shareholder of HZB since 2005 and has played a role in the development of HZB into a significant regional player. The bank had previously sold a 10% stake in HZB for AU$1.8 billion in March 2022 and agreed at that time not to sell its remaining stake until February 2025.
Following today’s positive market response, CBA’s shares have risen 37% over the past 12 months.
