Commonwealth Bank’s China sale delivers $1bn windfall

After two decades, the banking major calls time on one part of its ambitious Chinese expansion.

Commonwealth Bank has trimmed its exposure to China. Picture: NCA NewsWire

Commonwealth Bank is set for a near $1bn windfall as it pares back its exposure to China through the sale of the remaining stake in Bank of Hangzhou.

CBA sold its 5.45 per cent stake in the regional lender on Friday night to Shanghai listed New China Life Insurance Co. Gross proceeds from the sale is are expected to be $940m.

Both CBA and ANZ began building up stakes of around 20 per cent in a string of regional lenders around two decades ago, as part of a wave of investment into China as it attempting to open up its second tier banking sector.

Initially Chinese authorities had looked to the Australian banks to help their regional lenders improve financial performance and risk controls. But as the Chinese banks grew and pursued their own stock market listings, the Australian banks increasing became passive investors.

ANZ has since sold its holdings in Bank of Tianjin and Shanghai Rural Commercial Bank. CBA started selling down its stake in HZB three years ago. It still has exposure to a second regional lender Bank of Qilu.

“CBA has been a longstanding shareholder of HZB since its original investment in 2005, and we are pleased to have contributed to the development of HZB into a significant player in retail, wealth management and commercial banking across the Yangtze Delta region,” CBA chief executive Matt Comyn said.

CBA initially paid $100m for its 20 per cent stake.

The proceeds of the sale are expected to deliver a further boost to CBA’s core capital, a move set to stoke investor hopes of a capital return.

The Australian banking major is scheduled to deliver its first half earnings result on February 12.

Originally published as Commonwealth Bank’s China sale delivers $1bn windfall