Chinese buyer seen as negative for Wing Hang
Warning from Moody's comes because of the increased mainland exposure that the Hong Kong bank would have in the event of takeover
Wing Hang Bank, Hong Kong’s second-largest family-owned lender, which is in takeover talks, would likely have its credit rating downgraded if the acquirer was based on the mainland, Moody’s Investors Service said.
That comes after the rating agency placed Chong Hing Bank under review for a downgrade following the bank’s announcement on Friday it agreed to sell up to 75 per cent of its shares to Guangzhou-based investment firm Yue Xiu.
The list of potential suitors for Wing Hang includes Agricultural Bank of China and Singapore-based Oversea-Chinese Banking Corp and United Overseas Bank, market observers said.
“If the buyer was from China, the impact on [Wing Hang’s] standalone credit rating would be negative, as the bank would later develop more exposure to the mainland,” Moody’s senior analyst Sonny Hsu said.
“But if the buyer is from Singapore or Australia, then the impact would be mixed.” Hsu said parental support from a foreign acquirer could be positive for the ratings on Wing Hang’s debt or deposits.
Previous acquisitions of Hong Kong banks by mainland firms, such as China Merchants Bank’s acquisition of Wing Lung Bank, have consistently led to faster growth in the balance sheet and increased the mainland exposure of the acquired banks.
