China Life is in talks with the Wing Hang Bank to buy stake from Fung's family. Zhang Ting

Shares in local lender Wing Hang rose 5.11 percent or HK$5.40 yesterday, riding high on the tide of rumors that mainland insurance giant, China Life, might bid for a stake in the bank.

Wing Hang's chairman Patrick Fung and his family, currently hold the largest stake in the lender, owning 21.3 percent of the banks total 295 million share capital.

The second largest shareholder in the bank is Bank of New York with a 20 percent equity stake in the lender since 1988.

According to media reports, the stake involved in the potential acquisition is the 21.3 percent held by the Fung family. Neither Wing Hang Bank nor China Life was immediately available for comment regarding the issue yesterday.

Wing Hang is not the first bank in the territory to be eyed by mainland firms. Rumors had been circulating for some time that the Wu family, the controlling shareholder of Wing Lung Bank, might sell its stake to China Merchants Bank or Industrial & Commercial Bank of China.

It had also been reported that other small local lenders like Chong Hing Bank and Dah Sing Bank might also consider selling off their businesses, if the deal for Wing Lung pulls through with a good price.

Wing Hang, which recorded a net profit surge of 22.3 percent last year amid the US subprime fall-out, will provide good synergies to China Life, if the acquisition is successful, said Kenny Tang, associate director of Tung Tai Securities.

"It could provide a significantly strong overseas banking platform for China Life that could quicken its overseas expansion," Tang said, "Also, given the strict constraints around overseas investment for mainland insurers, China Life could potentially get away with the red tape via the acquisition."

Overseas investment of yuan assets held by mainland insurers is subject to stringent regulation by China Insurance Regulatory Committee, which is part and parcel of the central government's monetary control over the in-flows and out-flows of mainland's currency.

On the other hand, Tang added that as the pool of available-for sale small Hong Kong lenders begins to shrink, it is possible that other mainland financial institutions might compete for the stake.

Shares in China Life also inched up yesterday outperforming the broad Hang Seng Index to close up 0.16 percent or HK$0.05 at HK$30.95.

(HK Edition 05/29/2008 page2)