China Minsheng Banking Corp is in the final stages of talks to buy control of a domestic trust firm, as it diversifies in the financial sector, two sources familiar with the situation said on Monday.
Minsheng Bank, in which Singaporean government investment vehicle Temasek Holdings owns a stake, wants to buy between 70 and 90 percent of Shaanxi International Trust & Investment Corp in northern China, the sources said.
Shaanxi Trust's shares surged their daily limit of 10 percent on Monday, outperforming a rallying market. The company said after the market closed its Shenzhen-listed shares would be suspended from trade starting Tuesday as it planned to issue additional shares.
Minsheng Bank declined to comment.
Minsheng definitely wants to control Shaanxi Trust, which also wants to team up with a commercial bank to boost its sales of trust products, said one of the sources.
In the near future, you will see many similar deals as it means a win-win partnership between the bank and trust firm.
Minsheng approached Shaanxi Trust more than half a year ago and the two companies are now close to reaching a final agreement, which would give Minsheng management control of the Shenzhen-listed trust company, the sources said.
Minsheng's planned purchase of Shaanxi Trust comes after Bank of announced in May that it had agreed to pay no more than $160 million to buy an 85 percent stake of Hubei International Trust and Investment Co.
Bank of Communications, 18.6 percent owned by HSBC Holdings Plc, is China's fifth-largest lender by assets.
Financial details of Minsheng's planned purchase of Shaanxi Trust is so far unknown but the sources said the deal would be subject to regulatory approval.
The company plans to resume stock trading on September 4 after relevant matters are settled, Shaanxi Trust said in a statement, without elaborating.
Meanwhile, Beijing-based Minsheng Bank plans to launch a fund management joint venture with Royal Bank of Canada in November, pending approval by the China Securities Regulatory Commission, the sources said.
Beijing is encouraging Chinese investors to turn to professional fund managers for wealth management instead of individual investments in its bullish but speculative stock markets.
Earlier this year, Chinese regulators issued new rules to allow domestic trust firms to sell investment products through banking partnerships after a two-year national revamp in the trust sector, once in deep financial trouble and tainted by scandals.
Obviously, every Chinese bank is making efforts to boost its fee income-based services such as wealth management, said another of the sources.
The regulator has asked banks to slow down their lending expansion as Beijing is concerned about the risk of its overheating economy, so fee income-based services are becoming more and more important to banks' profits, he added.
The planned Minsheng and RBC fund venture, based in Shanghai, China's financial hub, would cooperate with Shaanxi Trust after Minsheng acquired it, creating a new platform for Minsheng's wealth management services, the sources said.
The launch of the fund venture and planned purchase of Shaanxi Trust are part of Minsheng's goal of boosting its wealth management services, which include a possible launch of private banking services in the near future, the sources said.