HSBC’s $1.75bn investment in Bank of Communications
Goldman Sachs and HSBC advised
Given the keen interest in China’s financial sector, HSBC’s acquisition of a 19.9% stake in Bank of Communications (BoCom), China’s fifth largest bank, for $1.75bn in cash was a landmark deal. It is not only the largest percentage stake taken by a foreign institution in a Chinese commercial bank, it is also by far the largest foreign investment in China’s financial services sector.
As part of the deal, BoCom became the first major bank in China to complete a comprehensive restructuring – transferring non-performing loans to a government asset management company – and a massive recapitalisation of $2.3bn, setting an example for the country’s financial reform.
As significant as the deal is for HSBC – giving it a foothold in China and a significant lead on its rivals – the judges were more impressed by the fact that any foreign bank was able to secure such an inroad into the notoriously difficult Chinese financial sector, with potentially transformative consequences. The deal provides access to BoCom’s vast network of more than 2700 branches in 137 cities and 20 million retail customers.
