HONG KONG/SINGAPORE (REUTERS) - Canadian insurer Manulife Financial Corp is nearing a deal to buy British bank Standard Chartered's Hong Kong pension business for about US$400 million (S$569 million) in an attempt to narrow the gap with its leading rival, people familiar with the matter said.
Retirement savings is emerging as a big business opportunity for life insurers in Hong Kong as the Asian financial hub is now home to a rapidly ageing population, with a higher life expectancy.
Hong Kong's US$80 billion mandatory provident fund (MPF) business is poised for consolidation and companies that lack scale will exit the market, banking sources said. HSBC and Manulife control nearly half of the retirement savings assets in Hong Kong.
Toronto-based Manulife has been stepping up its Asian presence in quest of faster growth. In April, Manulife struck a distribution agreement with Singapore's DBS Group for US$1.2 billion, giving it a 15-year partnership to sell products through the lender's Asian branch network.
Asia accounted for more than half of Manulife's insurance sales in the first quarter of 2015.
For Standard Chartered, the sale would come after it exited the Hong Kong consumer finance unit last year, as it seeks to shed sub-scale businesses. Standard Chartered managed about HK$20 billion (S$3.6 billion) under Hong Kong's mandatory provident fund (MPF) scheme.
A final deal may be reached as early as next week, which could also include a 15-year distribution agreement, though there is still a chance that the two parties may fail to agree on the terms, the people told Reuters on Wednesday.
Standard Chartered and Manulife declined to comment. The sources declined to be identified as the information is not public.
Last year, U.S.-based Principal Financial Group bought AXA SA's Hong Kong pension fund business for US$335 million, in what was the first such deal in more than a decade.
Standard Chartered's London-listed shares were up 3.1 per cent in early Wednesday trade, while the benchmark FTSE index climbed 1.8 per cent.
Asia-focused lender Standard Chartered has been battling challenging times and in June installed Bill Winters as its new CEO in an effort to halt sliding profits and improve ties with regulators and shareholders.
Winters has already shaken up the bank's management structure, streamlining its eight geographical regions into four units that will report directly to him.
The deal with Manulife would allow the bank to partner with a specialist pension provider, while allowing the Canadian company to use its branch network to sell pension products.