(Reuters) - Commonwealth Bank of Australia (OTC:CMWAY), the country's No. 1 lender, said it would sell a 10% stake of China's Bank of Hangzhou for about A$1.8 billion ($1.31 billion), exiting a nearly two-decade-old investment amid market pressure.
CBA said it would sell down its shareholding to entities controlled by the Hangzhou municipal government, advancing a strategy that has been adopted by most Australian retail banks to do away with non-core operations and focus on essential services at home.
China's banking and insurance sectors have, meanwhile, been under pressure from their non-performing assets since problems of debt-laden developer China Evergrande Group came to light last year.
CBA, the 1996-established Chinese lender's biggest shareholder, will retain its remaining shareholding of about 5.6% in Bank of Hangzhou until at least February 2025.
The completion of the deal, currently expected in mid-2022, was also estimated to bring in a tax gain of about A$340 million for Australia's biggest lender.
"The partial sale of our shareholding is consistent with our strategy to focus on our core banking business in Australia and New Zealand," CBA Chief Executive Officer Matt Comyn said.
Bank of Hangzhou's Chairman Chen Zhenshan said it "understands and respects the decision of CBA" to reduce the shareholding due to its own strategic considerations and capital allocation needs.
($1 = 1.3774 Australian dollars)