HLB eyes partial sale of 5% in Bank of Chengdu

PETALING JAYA: Hong Leong Bank Bhd (HLB) plans to partially sell up to 5% of its stake in China’s Bank of Chengdu Co Ltd (BOC), with part of the proceeds potentially distributed as a special dividend, the bank says.

This was among the key points following HLB’s session at the CGS International (CGSI) Research’s 4th Regional Financials Conference 2025 held recently.

HLB was represented by its chief financial officer Malkit Singh Maan.

“During the event, HLB mentioned its intention for a partial divestment of its 17.8%-owned associate company, BOC.

“HLB could dispose of up to 5% stake in BOC, according to the bank. HLB said that the process for the partial divestment of its stake in BOC would be extended into the financial year ended June 30, 2027 (FY27),” CGSI Research said in a report.

According to the bank, the plan is at an early stage and it has not identified any buyers for this. The bank said reasonable pricing for the deal would be between 0.9 times and 0.95 times of the book value of BOC at end-September 2025.

Should HLB pare down its stake in BOC, the proceeds would be utilised to support the growth in non-BOC businesses, mainly in Malaysia and Singapore, as well as paid out as a special dividend.

“Assuming HLB were to sell a 5% stake in BOC at the latter’s closing price of 16.82 yuan per share on Dec 8, 2025, the total proceeds received would be RM2.07bil.

“Assuming half of this is paid out as special dividend, this would translate into a dividend per share of 47.7 sen, representing an additional dividend yield of 2.2%.”

The bank also stated that Basel 3 adjustments could raise its Common Equity Tier 1 or CET1 capital ratio, which stood at 12.7% at end-September 2025, by around 50 basis points in FY26.

CGSI Research said the sale could increase HLB’s capacity to pay dividends by RM922.2mil, though this does not mean the full amount will be distributed.

The potential divestment of a 5% stake in BOC would further increase its CET1 capital ratio by around 90 basis points, excluding any payout of a special dividend, according to the bank.

“This would allow HLB to gradually increase its dividend payout ratio to 50% to 60%, in line with its peers, in our view,” said the research firm which retained its “add” call on HLB, premised on the potential re-rating catalysts of above industry loan growth and robust fee income growth, plus the uptrend in its dividend payout ratio.

It has a RM31.70 target price on the stock.