SINGAPORE: DBS Group Holdings has secured the necessary regulatory approvals to augment its existing stake in Shenzhen Rural Commercial Bank Corporation Limited through its wholly-owned subsidiary, DBS Bank Ltd.
As of the recent approval, DBS’s stake in Shenzhen Rural Commercial Bank has risen to 16.69%, an increase from the initial 13% acquired in Oct 2021, The Edge Singapore reports.
Following the acquisition of the 13% stake, DBS engaged in discussions with Shenzhen Huaqiang Asset Management Group Co. Ltd. starting from the first quarter of 2023 to explore the acquisition of Shenzhen Huaqiang’s stake in Shenzhen Rural Commercial Bank. An agreement was subsequently reached on Sept 15, contingent upon regulatory approval.
In the agreed-upon transaction, DBS will procure 383.6 million shares in Shenzhen Rural Commercial Bank from Shenzhen Huaqiang at a total cost of RMB2.01 billion (S$376 million), equivalent to RMB5.25 per share. The consideration represents 1.05 times the book value per share for the latest quarter.
Notably, the transaction will be financed using internal cash resources, with a negligible impact of less than 0.1 percentage points on DBS’s consolidated capital ratios.
DBS clarifies that executing this transaction will not necessitate any commitment of technology resources. The bank has been under a six-month ban by the Monetary Authority of Singapore (MAS) since Nov 1, preventing non-essential IT changes to maintain a “sharp focus” on restoring the resilience of its digital banking services.
The financial implications of this transaction are anticipated to be immediately accretive to DBS’s earnings and return on equity (ROE).
The shares of DBS reflected positively on the stock market, closing at $33.41 on Dec 29, up by 1.12% or 37 cents at 5:12 p.m. SGT. /TISG