DBS to acquire 13% stake in Shenzhen Rural Commercial Bank for $810m

It will become SZRCB’s largest shareholder upon the deal’s completion.

DBS Bank has entered into an agreement to acquire a 13% stake in Shenzhen Rural Commercial Bank (SZRCB) for S$1.079b or about US$810m (RMB5.29b).

In a press release, the Singaporean bank confirmed that it has obtained approvals from the Monetary Authority of Singapore (MAS) and the China Banking and Insurance Regulator Commission, Shenzhen Office (Shenzhen CBIRC) to proceed with the acquisition.

Under this investment, DBS will acquire 1.35 billion new shares in SZRCB at RMB3.91 per share, representing 1.01 times the book value per share of SZRCB as of 31 December 2020.

Upon the completion of the Investment, DBS will become the largest shareholder in SZRCB and will have representation on SZRCB’s board of directors, the bank revealed.

The Investment will have less than 0.2 percentage points (ppt) impact to the DBS Group’s capital ratios, and is expected to be immediately accretive to earnings and Return on Equity (ROE).

Further, DBS intends to fund the Investment using internal cash resources and it is expected to complete the Investment upon receipt of China Securities Regulatory Commission (“CSRC”) approval.

Established in 2005 and headquartered in Shenzhen, SZRCB is a privately-owned commercial bank that currently operates one of the largest bank branch networks in the city. Over 210 of its 217 branches and over 2,100 self-service terminals are located in Shenzhen.

The bank currently has over 3,600 employees servicing over 5 million active retail customers and over 170,000 active corporate customers.

Approximately 40% of its total loans are in the retail segment and remaining 60% in corporate segment, largely to Shenzhen-based small and medium enterprises.

Based on SZRCB’s financial results for the year ended 31 December 2020, SZRCB has S$106b (RMB519b) of total assets and S$82b (RMB404b) of deposits, and generated RMB 4.8 billion (SGD 976 million) of net profit after tax. It has a strong track record of profitability, achieving average ROE of over 17% since its establishment in 2005.