The Shenzhen Development Bank's fresh reshuffle of its board may hopefully improve the lender's performance by ushering in foreign expertise, analysts said yesterday.
That will be the biggest benefit the bank will get from giving what can potentially be management control to its foreign strategic investor, they said.
A board meeting on Tuesday elected John Langlois, who represents Newbridge Asia AIV III as chairman of one of China's five listed lenders, the bank said yesterday in a statement.
This followed a reshuffle of its 10-member board on Monday, which brought five new members from Newbridge, a US equity fund.
The reshuffle and appointment of Langlois surprised some analysts, who cited a 25 per cent foreign stake ceiling Chinese regulators have put in place as a way of protecting the domestic banking industry from foreign control.
The two parties said earlier Newbridge would pay 1.24 billion yuan (US$149.8 million) for 17.89 per cent of the bank, reserving an option to buy more shares in the future.
The deal, in which four major Chinese shareholders agreed to transfer a total of 348 million shares to Newbridge, is expected to be completed by the end of this year, the bank said on Monday.
But more foreign control may turn out to be worthwhile for the Shenzhen bank, whose poor performance in recent years has frustrated investors, analysts said.
"That (board reshuffle) could be part of the deal, or else who would be buying into the bank," said Dong Chen, a senior analyst with China Securities. "Shenzhen Development Bank has the worse asset quality among listed banks, and its business performance has not been good."
He told China Daily: "Since Newbridge could not take a controlling stake, it would want greater influence on management to ensure profitability."
Chinese regulators have been encouraging foreign investors to buy into domestic banks to help improve their competitiveness. Nine Chinese banks have sold equity stakes to overseas strategic investors, and nine more such deals are in negotiation, regulators said earlier. But the strict restrictions on foreign ownership have dampened the appetite of many foreign investors, although they remain enthusiastic about the huge market.
