The Chinese bank is conducting feasibility studies over a proposal to list BOC International, sources familiar with the discussions told FinanceAsia.
The idea was brought to the table after Bank of Communications announced similar plans to list its investment banking business earlier this year, according to the people, adding there is no certainty whether the proposal will go ahead at this point.
If the deal goes go ahead, it would be only the latest move by Bank of China to monetise its assets, an effort it has ramped up since late last year.
The state-owned lender made $8.8 billion from a one-off gain after the sale of Nanyang Commercial Bank to China Cinda Asset Management late year, and reaped another $1.1 billion from the listing of its aviation leasing business, BOC Aviation, in Hong Kong in the middle of this year.
Last month, Bank of China said it was considering selling its entire 70.49% stake in Hong Kong-based Chiyu Banking Corporation, which could potentially net another $3 billion for the seller.
Any partial sale of BOC International will be much smaller in scale. Assuming a 25% free float, the initial public offering could raise about $500 million based on the subsidiary’s book value of HK$15.3 billion ($2 billion) as of the end of last year.
But it could be of greater strategic importance for the bank in the long term.
Expansion plan
Bank of China’s disposal of Nanyang Commercial Bank and the potential sale of Chiyu Bank were seen by some analysts as being attempts to reduce non-performing loan exposure, since the two institutions are increasingly exposed to China’s small and medium-sized enterprises. In that sense, the two transactions are seen as withdrawals from the Hong Kong market.
The listing of BOC International is a little different. The deal appears to have more optimistic motivations, since an initial public offering would give the business an independent platform to raise funds for its own development, according to the people.
The potential listing of BOC International would also align with the bank’s wider plan to expand its offshore business amid rising credit costs and margin pressure for its mainland operations. President Chen Siqing has previously said that the bank eventually wants to generate 30% of its net profit from overseas, compared to 23% in 2015.
BOC International is seen as the bank’s main offshore business since most of its revenue is generated outside the mainland.
The Hong Kong-headquartered subsidiary engages in equity financing, bond underwriting and financial advisory businesses. Last year, it completed 11 initial public offerings, 50 bond issues, 7 private placements and 8 financial advisory deals.
It also runs private banking and asset management through its subsidiary BOCI-Prudential Asset Management. BOC International’s total operating profit was $555 million last year.
