Rapaport Magazine


By Marc Goldstein
Yinren Group Agrees to Buy Antwerp Bank

It’s official. Following more than one year of negotiations, KBC, a Brussels-based bank, reached agreement on December 19, 2013, to sell its subsidiary Antwerp Diamond Bank (ADB), a leading lender to the diamond industry, to the Shanghai-based Yinren Group. Yinren is a diversified enterprise group with activities in real estate, international trade and the diamond industry. It has operations in Mainland China, Hong Kong and Brazil, and is already active in diamond mining and manufacturing. The deal will enable Yinren to leverage ADB’s reputation and expertise in developing the Chinese diamond market and facilitate the bank’s expansion into the market.
   Financial details of the deal, which is still subject to regulatory approval, were not disclosed, but the main terms provide that the Yinren Group will acquire 100 percent of KBC’s participation in ADB, which represents 99.9 percent of ADB’s shares. Regulatory approval is expected to be completed within 2014 by authorities in the three countries where ADB has branches: Belgium, Singapore and India.

Asset Transfer
   The sale of ADB will have only a negligible up-front impact on the KBC Group’s earnings. The deal will free up around $140 million of capital for KBC, primarily by reducing risk-weighted assets, which will ultimately improve KBC’s Tier-1 ratio, based on Basel II credit standards, by almost two-tenths of 1 percent as calculated on September 30, 2013.
   Before the deal closes, part of ADB’s loan portfolio — primarily the higher-risk and nonperforming loans with a net book value of approximately $550 million out of a total $1.6 billion portfolio — will be transferred to KBC Bank. As part of the sale, KBC will also advance approximately $270 million in capital to ADB for a maximum period of two years on a secured basis.

Assuring ADB’s Survival
   In sharing his view on the effect of the sale on the industry, Pierre De Bosscher, chief executive officer (CEO) of ADB, said, “What I feel, when I hear the reactions that I’m currently gathering from the industry all over the world, is that it is a big relief: ADB is here and is here to stay. It’s important for Antwerp, and for the industry, since the big fear was that at some point ADB would leave the diamond business. Obviously, we will have to cut back temporarily to some extent, until we receive approval from the regulators. At that point, we will reveal and implement our new strategy. What I can tell you right now is that we’re going to redeploy with a two-pronged focus: Antwerp on the one hand and the Middle East and Far East on the other.”
   The sale is expected to change the way the ADB business is driven, explained De Bosscher. “Currently, our mother bank is a listed company, which makes it easier and cheaper to get financing. Virtually, we are one phone call away from funding. From the moment the deal is closed, we’re looking at a totally different scenario. We’ll have to attract deposits and will be approaching all possible sources of funding, including private deposits, institutional deposits, etc. Inevitably, it’s going to cost ADB more to raise money.”

Impact on Management
   Institutions such as banks are valued not only in terms of their capital assets, but also for their management expertise and experience. In the case of ADB, De Bosscher was adamant that “The management remains. Actually, Yinren is buying three things: a brand, the management knowledge and a customer base. The new owner’s plan is to expand, with a focus on China, where they already are strongly planted. This means more business opportunities for our existing Antwerp-based clients in China, and the development of new customers in China.”
   Johan Thijs, CEO of KBC, said that “Because of Antwerp Diamond Bank’s very specific business activity in a niche market, this divestment turned out to be a challenging project, though one which we have managed to conclude successfully. Antwerp Diamond Bank is a strong brand and a leading player in the diamond banking industry, with a long and rich history, and committed staff. We are convinced that the Yinren Group will develop Antwerp Diamond Bank’s business going forward, securing the future of its staff and ensuring that quality service will continue to be provided to its customers.”

Article from the Rapaport Magazine - January 2014. To subscribe click here.

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