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Pudong Bank to acquire Shanghai Trust

By Leng Cheng | June 16, 2015, Tuesday | Online Edition

SHANGHAI Pudong Development Bank Co plans to buy 97.3 percent stake of Shanghai International Trust Co at 16.4 billion yuan (US$2.6 billion) as the city speeds up reform of its financial units.

The bank and the trust company are both held by the Shanghai's investment arm Shanghai International Group. Pudong Bank will issue 999.5 million shares for 16.36 yuan per share to 11 trust shareholders to pay for the acquisition, according to a filing to Shanghai Stock Exchange today.

Shanghai International Group, a city government investment arm with 1.8 trillion yuan of assets under management, is overhauling its holdings in banks, brokerages, insurance companies and trusts.

The acquisition among the group is seen to be a sign of the state-backed company to generate more resources to form a financial conglomerate, Song Qinghua, the president of School of Finance at Zhongnan University of Economics and Law.

The move also comes as China's government accelerates the biggest reform of its state-owned enterprises since the late 1990s, as its financial version would be reflected as commercial banks' transition to gathering more diversified businesses in order to survive the upcoming interest rate liberalization.

"Commercial banks are under the pressure of gaining more from intermediate business income instead of taking profits on interest margin," told Lu Zhengwei, senior economist at Industrial Bank Co.

"They have to acquire insurance, securities and trust companies to get into the businesses," Lu said.

Shanghai-traded shares of Pudong Bank will continue to be suspended due to the acquisition. They last traded on June 5.

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