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CMB Accepts 21.6% Equity in CMF at EUR 63.57m

The market availability of interest rates and financial disintermediation have accelerated the financial service integration strategies of commercial banks. As a major joint-equity commercial bank, CMB is taking a new step towards integration. Today, CMB announced that its board passed a resolution to accept a 21.6% equity share in the China Merchants Fund (CMF), as transferred by ING Asset Management at a price of EUR 63.57 million.

After this transaction, CMB now holds 55% equity in CMF, an increase of 21.6%, and has become the controlling shareholder. Industry analysis reveals that increasing its shareholding in CMF enables CMB’s plan to build the first fund management company controlled by a joint-equity bank in China - this may be the first success story of a commercial bank in terms of obtaining control of a funds company through an equity purchase.

On April 10, 2006, CMB's board adopted the Proposal on the Equity Purchase of China Merchants Fund Management. In May 2007, CMB made an announcement that CBRC had approved CMB to accept CMF equity from the following organizations and percentages: China Power Finance, 10%; China Huaneng Finance Corporation, 10%; COSCO Finance, 10%; and China Merchant Securities 3.4%. 

After the above transfer, the shareholding structure of CMF is as follows: 33.4% held by CMB, the largest shareholder of CMF, 33.3% held by China Merchants Securities, and 33.3% held by ING Asset Management B.

Before CMB became a shareholder of CMF, CMF had five shareholders: CMS at 40% equity, ING at 30%, China Power Finance at 10%, China Huaneng Finance at 10%, and COSCO Finance at 10%.

Establishing a fund management company under CMB was given the go ahead in 2005 when the PBoC, CBRC, CSRC and CIRC jointly issued the Pilot Measures for the Administration of the Establishment of Fund Management Companies by Commercial Banks. To date, the five major state-owned banks have set up fund management companies. Among joint-equity banks, SPD bank, China Minsheng Banking Corp, and CMB are similar in terms of strategic methodologies.

Data shows that the book value of CMF’s net assets was CNY 710 million at the end of June, 2012. According to CMB, the shareholding increase and control of CMF facilitates CMB’s integrated service platform and strategic reforms.

In the first half of this year (2012), CMB’s net profits totaled CNY 23.377 billion, up 25.68% from the same period last year (down 6.48% from Q1); a net interest income of CNY 43.641 billion, up 22.19% from the same period last year; and a non-interest income of CNY 13.478 billion, up 30.35% from the same period last year.