CBA shares pushes higher on $940m deal

CBA is selling its remaining stake in a Chinese bank.

| More on:
Two hands being shaken symbolising a deal.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Commonwealth Bank of Australia (ASX: CBA) shares are on the move on Tuesday morning.

At the time of writing, the banking giant's shares are up 1% to $159.95.

Why are CBA shares rising?

Today's gain may have been driven by news that the big four bank is making a divestment.

According to the release, CBA has entered into a binding sale agreement to sell its remaining 5.45% shareholding in Bank of Hangzhou Co. (HZB).

Established in September 1996 and located in the city of Hangzhou in the Zhejiang province of China, HZB is a regional commercial bank that is listed on the Shanghai Stock Exchange. It is principally engaged in the provision of banking and related financial services.

CBA has agreed to sell its stake to New China Life Insurance Co. (NCI), which is a Beijing headquartered life insurance company that is dual listed on the Shanghai Stock Exchange and the Hong Kong Stock Exchange.

The company revealed that the deal with NCI is expected to see total gross proceeds of approximately $940 million.

Though, completion of the transaction is subject to a number of conditions. This includes regulatory approval from the National Financial Regulatory Administration, receipt of a confirmation opinion from the Shanghai Stock Exchange, and registration of the share transfer by the Shanghai Branch of China Securities Depository and Clearing Corporation.

But if all goes to plan, the completion of the transaction is currently expected to occur around mid-2025.

Upon completion, the transaction is expected to deliver a pro forma uplift to the bank's CET1 ratio of approximately 18 basis points on an Australian Prudential Regulation Authority basis. This is based on the bank's risk weighted assets as of 30 September 2024.

Management commentary

Commenting on the agreement, CBA's chief executive officer, Matt Comyn, said:

CBA has been a longstanding shareholder of HZB since its original investment in 2005, and we are pleased to have contributed to the development of HZB into a significant player in retail, wealth management and commercial banking across the Yangtze Delta region.

CBA sold a 10% stake in HZB in March 2022 for approximately $1.8 billion and agreed at that point not to sell its remaining stake until February 2025.

At the time, Comyn revealed that the sale was "consistent with our strategy to focus on our core banking business in Australia and New Zealand."

Following today's move, Australia's largest bank's shares are now up 37% over the past 12 months.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
Bank Shares

CBA shares are now worth a total of more than $300 billion. Here's why that's a problem

CBA’s ever growing stock market dominance is raising red flags. But why?

Read more »

An excited man stretches his arms out above his head as he reaches a mountain peak.
Record Highs

Breaking: CBA shares hit a new record of $180

CBA shares can't possibly keep rising can they?

Read more »

A small child in a judo outfit with a green belt strikes a martial arts pose with his hand thrust forward.
Bank Shares

Forget the big 4 banks, Macquarie tips 11% upside for this ASX All Ords Financials stock

This broker is telling investors to look beyond CBA.

Read more »

View of a business man's hand passing a $100 note to another with a bank in the background.
Bank Shares

What price should I pay for the Big 4 banks?

Macquarie has updated its target price on Australia’s Big 4 banks.

Read more »

Bank building with word Bank on it.
Bank Shares

What happened with the big four ASX 200 bank stocks in May?

Guess which ASX 200 bank stock led the charge higher again in May.

Read more »

An ASX investor in a business shirt and tie looks at his computer screen and scratches his head with one hand wondering if he should buy ASX shares yet
Bank Shares

After the recent RBA rate cut, why is Macquarie underweight ASX bank shares?

Macquarie is not banking on strong returns from this sector.

Read more »

Business people discussing project on digital tablet.
Bank Shares

CBA vs Macquarie shares: Which one is best?

Ord Minnett has given its verdict on these giants.

Read more »

A woman wearing yellow smiles and drinks coffee while on laptop.
Bank Shares

How the CBA share price smashed the benchmark to close May at all-time highs

I hope you didn’t sell your CBA shares in April!

Read more »