ABC seeks buyer for Hong Kong subsidiary

03 January 2003
Bahrain-based Arab Banking Corporation (ABC)has entered into negotiations for the sale of its 55 per cent stake in Hong Kong-based International Bank of Asia (IBA). It is understood that talks are being held with banking groups from Malaysia and Singapore interested in acquiring control of IBA. Alongside ABC, the second major institutional shareholder in IBA, China Everbright, has announced that it is also considering the sale of its 20 per cent stake.

Interim balance sheet figures released on 30 June 2002 give ABC's stake a book value of about $260 million. Sources say ABC is seeking a sale price of about 1.5 times book value. Sale valuations of the shareholding will be impacted by the comparatively weak earnings record of IBA, which has recently been hit by strong rises in provisioning. Its profits for the first half of 2002 of HK$ 100.8 million ($12.9 million) give an annualised return on equity of only 5.5 per cent.

The sale of IBA - if successfully completed - would be the logical extension of ABC's strategy of focusing on the Arab world (MEED 25:10:02, The MEED Interview, page 8).

The potential sale of IBA could also release some profits for ABC's books. Interim results point to a difficult year for the Arab world's largest financial institution. Nine-month profits of only $55 million were posted in November, less than half the earnings generated in the corresponding period of 2001 (MEED 15:11:02).

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