Commonwealth Bank of Australia (CBA) plans to purchase 19.9% of the shares in China's Hangzhou City Commercial Bank for A$100 million ($78 million).
At the same time, the bank has bought Macquarie Bank's Shanghai-based mortgage broking business and plans to re-name it CommFinance. CBA is said to have paid around A$1.4 billion for the Macquarie mortgage originator, which has a loan book in China estimated at several hundred million dollars.
The acquisitions still await approval from the Chinese regulatory authorities.
The acquisition in Hangzhou follows a similar investment made in November last year when CBA bought 11% of Jinan City Commercial Bank in Shandong Province for a mere A$17 million. The deal included an option to buy additional equity up to 20%.
This is the maximum allowable by regulation for a single foreign investor in the banking system.
Both deals involve strategic co-operation agreements, with the Chinese banks receiving technical assistance in key areas through a capability transfer programme.
In making the Hangzhou announcement, CBA said Hangzhou City Commercial is ranked in the top five city commercial banks in China. The bank is located in the capital city of Zhejiang province on the country’s eastern seaboard, south of Shanghai. The city has a population of six million and was recently named as the top investment location in the PRC by Forbes magazine.
CBA has beaten its three rival Australian banks to the Chinese market. ANZ has been reviewing a minority stake in the Shanghai Rural Credit Co-operative Union for over two years now. The co-operative is an amalgamation of 200 separate credit unions that, in 2003, had assets worth a total of A$17 billion. But the deal is still going through due diligence.
ANZ is, however, the only Aussie bank to have branches in China – one in Shanghai and one in Beijing – which focus on trade finance.
CBA has said it will not open branches under its own brand while it owns stakes in local banks. And it has also indicated that there are no plans to merge the Jinan and Hangzhou banks.