The Hongkong and Shanghai Banking Corp Ltd (HSBC) and Ping An Insurance (Group) Co of China Ltd will jointly acquire Fujian Asia Bank, both companies said yesterday.

In a statement, HSBC said it has entered an agreement to acquire 50 per cent of Fujian Asia Bank Ltd for not more than US$20 million in cash.

China Ping An Trust & Investment Co Ltd, a subsidiary of Ping An Insurance Group, will purchase the remainder.

Under the transaction agreement, China Ping An will inject another US$23 million into Fujian Asia Bank, enlarging its capital to US$50 million and diluting HSBC's stake to 27 per cent. The bank will be renamed Ping An Bank Ltd upon completion of the deal, expected by the end of the first quarter of 2004, the statement said.

Experts said that the partnership produce positive results for both companies.

"It is apparently a mutually complementary deal since HSBC has expertise in the banking area and Ping An is an insurance giant," said Yi Xianrong, a financial researcher with the Chinese Academy of Social Sciences.

"HSBC's advantage will greatly help Ping An in foraying into the banking sector, while Ping An's rich local experience will help prosper the new firm."

Fujian Asia Bank began as a small bank in Fuzhou in Chinese mainland in 1993 as a Sino-foreign equity joint venture.

It had assets of US$32.7 million at December 31, 2002.

According to the statement, the future Ping An Bank's long-term objective is to develop consumer banking businesses, including credit card and real estate mortgage lending outlets, if permitted.

Experts said that entering the banking sector will be a great boost for Ping An Insurance Group to become a financial holding conglomerate.

Ping An Insurance Company has the second largest life insurance operation and is the third biggest property and casualty insurer firm. The company also engages in investment trusts and securities.

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