China Life Insurance plans to completely sell all the shares of Bank of Hangzhou it owns.

On the evening of August 20th, Bank of Hangzhou announced that due to asset allocation needs, China Life Insurance plans to reduce its stake in Bank of Hangzhou by no more than 110,092,230 shares through centralized bidding or bulk transactions within three months after three trading days, at market price.

In fact, the aforementioned 110 million shares are all of Bank of Hangzhou's shares held by China Life Insurance. That is to say, if this reduction plan is successfully completed, China Life Insurance will completely exit the ranks of the bank's shareholders. Calculated at the current stock price, China Life Insurance may cash out RMB 1.49 billion by completely selling its shares this time.

In the industry's view, China Life Insurance's reduction this time is mainly due to its own strategic adjustment needs. At the same time, it provides the state-owned shareholders of Bank of Hangzhou with space to increase their shareholdings. It is expected that local state-owned shareholders will take over and increase their shareholdings. Overall, the impact of this reduction on Bank of Hangzhou will be limited, but it may cause short-term fluctuations in the stock price.

For asset allocation needs, China Life Insurance plans to completely sell its 110 million shares of Bank of Hangzhou.

This is not the first time in recent years that China Life Insurance has reduced its stake in Bank of Hangzhou.

According to reporters from Cailian Press, before Bank of Hangzhou went public, China Life Insurance held 14.5% of its shares, ranking fifth in terms of equity. After its listing, China Life Insurance continued to increase its holdings for several years, with the highest number of shares held reaching 28.5%. However, since 2021, China Life Insurance's holdings have continued to decline, until today when it announced plans to completely sell the remaining 110 million shares.

Su Xiaorui, a senior researcher at Suxizhiyan, believes that in recent years, some shareholders have chosen to transfer equity of small and medium-sized banks in public market transactions based on investment cost-effectiveness considerations or balancing the focus on the main business. China Life Insurance's continuous reduction of Bank of Hangzhou's equity is a typical portrayal of small and medium-sized bank equity being frequently transferred in public market transactions.

At the same time, some industry insiders also believe that China Life Insurance's reduction this time is a "regulatory action", that is, it promised during the bank's IPO to reduce its holdings after the lock-up period ended.

It is understood that the shares China Life Insurance plans to reduce this time are all of Bank of Hangzhou's 110 million shares, accounting for 1.86% of the total share capital. This includes 56,169,505 shares acquired before Bank of Hangzhou's IPO, as well as 53,922,725 shares acquired through the capital reserve conversion in the 2017 and 2018 distribution plans after the bank's listing.

According to Bank of Hangzhou's prospectus, in 2009, Bank of Hangzhou conducted its seventh capital increase and share expansion, and China Life Insurance subscribed to 50 million shares of Bank of Hangzhou with cash contributions of RMB 650 million. In 2014, China Life Insurance also subscribed to Asia Development Bank's 79.2 million shares of stocks at prices of RMB 11.6/share and RMB 11/share and 6 million shares of stocks held by Hangzhou News Real Estate Management & Development Co., Ltd. At that time, China Life Insurance promised not to transfer the stocks it acquired from Asia Development Bank and Hangzhou News Real Estate Management for 5 years from the delivery date.

The stock price may be negatively affected in the short term, and it is expected that local state-owned shareholders will take over and increase their shareholdings.

Regarding the impact of China Life Insurance's planned reduction of 110 million shares of Bank of Hangzhou, the industry generally believes that this reduction will not have a substantial impact on Bank of Hangzhou's related business, but it may cause short-term fluctuations in the bank's stock price. "As far as the reduction is concerned, because the transfer ratio is not large, the impact is relatively limited," Su Xiaorui said.

According to Zheng Jiawei, Chief Fixed Income Analyst at Yongxing Securities Research Institute, China Life Insurance's shareholding reduction this time is mainly due to its own strategic adjustment needs, which will help optimize the asset allocation of China Life Insurance and raise funds for investment in other innovative enterprises. At the same time, it also provides more room for local state-owned shareholders of Bank of Hangzhou to increase their shareholding. It is expected that they will take over and further increase their shareholding proportion in Bank of Hangzhou.

In his opinion, shareholding reduction generally leads to short-term fluctuations in stock prices, but in the long run, the stock price of Bank of Hangzhou depends more on its own operating performance and market outlook. This shareholding reduction will not have a negative impact on the bank's operations and future development.

"This shareholding reduction will definitely have a short-term negative impact on Bank of Hangzhou's stock price, but later, some funds with lower risk appetite, especially those with high attention to the high dividend sector like banks, will still take on Bank of Hangzhou and other such symbols," Zheng Jiawei said.

From the perspective of stock price, after several years of sluggish performance, since 2024, the stock price of Bank of Hangzhou has continued to rise, from 9.49 yuan/share at the beginning of the year to more than 13 yuan/share. As of the close of August 20th, Bank of Hangzhou was at 13.53 yuan/share, with a daily decline of 0.15%, up 42.57% from the beginning of the year. Based on the current stock price, if China Life Insurance's shareholding reduction plan is smoothly completed, it will cash out 1.49 billion yuan.