The Bank of East Asia (BEA) said it would sell its life insurance business and seek potential partnerships to grow its core business following a months-long strategic review prompted by a long-running shareholder battle with Paul Singer’s Elliott Management over the lender’s direction.
Hong Kong’s largest independent and family-run bank said the sale of BEA Life would enhance the value of its business, improve the lender’s financial position and enable management to focus on its core banking operations in Hong Kong and mainland China.
As part of the sale process, the 101-year-old lender said it would seek to enter into a long-term exclusive distribution agreement to sell insurance products through its banking platform.
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“With a more nimble business, we will be better positioned to pursue our strategic priorities, thereby strengthening our core operations, supporting our growth initiatives and optimising shareholder return,” Adrian Li Man-kiu and Brian Li Man-bun, BEA’s co-chief executives, said in a statement.
BEA put a five-year legal battle with US hedge fund Elliott on hold in March after it agreed to the strategic review. Elliott supported the review and agreed to stay its legal action at the time.
Goldman Sachs, which helped conduct the review, is serving as a financial adviser for the sale of the life insurance business. The insurance business reported gross written premiums of HK$4.8 billion (US$619 million) in 2019.
Following the review, the bank said it would explore ways to grow its core businesses, including potential strategic partnerships with its mainland China banking operations.
The lender also said it would seek to enhance shareholder value by raising its fee-based income through a renewed focus on wealth management, lower its cost-to-income ratio by streamlining its operations and further strengthen its risk management practices.
Shares of BEA closed 1.4 per cent higher at HK$15.88 in Hong Kong on Wednesday following the announcement.
“The sale of BEA Life will be a good first step and we look forward to continuing our engagement while the company follows through on this and the other important conclusions of the review on strategic initiatives to create value for shareholders,” Jonathan Pollock, Elliott’s co-CEO and chief investment officer, said in a statement.
The sale of the life business represents the latest challenge for Adrian Li and his brother Brian since their father, David Li Kwok-po, stepped down as CEO in July 2019.
BEA posted its worst annual results in a decade last year as it faced a surge in bad loans in mainland China, prompting the lender to reorganise its mainland operations. Its bottom line also was buffeted by months of anti-government protests in Hong Kong last year and the economic fallout from the coronavirus pandemic this year.
In August, the lender said its efforts to improve asset quality in its mainland portfolio were paying off as it reported a 53 per cent increase in profit in the first half of the year despite the weak economic environment. Net charges for impairment losses almost halved from a year earlier and losses in its mainland operations narrowed during the period, the bank said.
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