Bank of Communications Mulls Plan to Reform Ownership Structure

Jul 28, 2014 2:40 pm ET

July 29 (Bloomberg) -- Bank of Communications Co. said it’s studying plans to deepen its mixed-ownership structure, a move that may introduce more private and foreign investment into the state-controlled bank.

The bank, China’s fifth largest, hopes to strengthen risk management and boost its competitiveness in the process, the company said in a statement to Shanghai’s stock exchange yesterday.

Bocom shares in Shanghai climbed the most since September yesterday after Reuters reported on July 25 that the lender wanted to sell more stakes to private investors and had applied to become the first state-controlled bank to pilot so-called hybrid ownership. Bocom is part-owned by HSBC Holdings Plc and the largest single stake in the lender is the 27 percent held by China’s Ministry of Finance.

“When you bring in more private capital, in theory it will help improve corporate governance and boost efficiency,” Richard Cao, Shenzhen-based analyst at Guotai Junan Securities HK Ltd., said by phone.

Bocom’s Shanghai shares jumped 9.9 percent to 4.22 yuan at the close of trading yesterday, the biggest gain since Sept. 9. The bank’s Hong Kong shares climbed 6.2 percent to HK$5.81.

The lender already has the basic features of hybrid ownership as a publicly listed company, Bocom said in its statement yesterday.

Chinese Communist Party leaders pledged in November to give market forces a bigger role in the economy. HSBC’s stake in Bocom was 19 percent as of March 31, according to the Chinese bank’s earnings announcement released April 29.

--With assistance from Penny Peng in Beijing.