SPDB considers buying controlling stake in trust firm

Shanghai Pudong Development Bank said late Monday night that it's considering the purchase of a controlling stake in a trust company from its parent, as it develops its transformation into a comprehensive financial group.

The trust company, Shanghai International Trust Co Ltd, is now controlled by the bank's parent company, Shanghai

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International Group, which is a holding company of the Shanghai government for stakes in State-owned enterprises in the city.

Shanghai Pudong Development Bank said in a statement to the Shanghai Stock Exchange that a deal is being studied. No further information was provided. Trading of the bank's shares in Shanghai was suspended on Monday following the announcement.

Local media reported on Monday that the bank plans to purchase all of the stakes in Shanghai International Trust, which had earnings totaling 9.75 million yuan ($1.6 million) in 2012.

At the moment, Shanghai International Group holds a 66.33 percent stake in the company, while Shanghai Jiushi Corp has 20 percent. The rest is held by 11 other companies.

SPDB's media department couldn't be reached for comment on Tuesday.

A deal would mark another step in Shanghai Pudong Development Bank's business diversification. Having started as a commercial lender, SPDB has over the years expanded into mutual funds, financial leasing and rural banking. In 2012, it joined hands with Silicon Valley Bank, a US-based high-tech commercial bank, in setting up a joint venture to lend US dollar loans to startups. On March 5, SPDB spent HK$8.5 million ($1.1 million) and bought a Hong Kong investment banking license from AsiaVest Partners Ltd. It also controls mutual fund AXA SPDB Investment Managers and financial leasing company SPDB Financial Leasing Co Ltd.

SPDB said in an annual result flash in January that profit jumped more than 20 percent in 2013 to 53.9 billion yuan.

Xiao Liqiang, a banking industry analyst with China Merchant Securities Co Ltd, said the deal reflects the Shanghai government's plan to use SPDB as a key holding platform for financial assets in its latest round of State-owned enterprise reform. He added the government will likely allocate more resources to SPDB.

Many Chinese lenders are trying to expand beyond their traditional business model in recent years in the expectation profit margins will be squeezed by pending interest rate liberalization.

Central bank Governor Zhou Xiaochuan said earlier this month in Beijing that the whole interest rate liberalization process will be finished in one to two years. Liberalization encourages competition and makes deposits dearer and loans cheaper.

Shanghai International Trust Co Ltd, founded in 1981, has registered capital of 2.5 billion yuan.

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