CDB Leasing, the parent company of CDB Aviation, is expected to be sold due to a shift in policy bank direction after years of focusing on state-owned commercial enterprises, market sources familiar with the matter tell Airfinance Journal. 

No specific timeline was given for the disposal, but sources say a sale early next year is likely.

Hong Kong Stock Exchange-listed CDB Aviation declined to comment on the matter when contacted by Airfinance Journal. 

Controlled and operated by China Development Bank with the approval of the China Banking Regulatory Commission, CDB Leasing is one of the oldest and most influential financial leasing companies in China. 

Its aviation business has the largest presence in Ireland of any Chinese aircraft lessor. 

CDB Aviation's fleet consists of 273 aircraft, with an average age of 4.4 years, Airfinance Journal's Fleet Tracker indicates. Of these aircraft, 125 are the latest-generation models in their respective segments.

Its orderbook consists of 59 Airbus A320neo-family aircraft, four A330-900s and 17 Boeing 737 Max 8s.

All three major credit rating agencies have an investment-grade rating for the lessor, but a change in ownership could impact that stamp of low funding risk.

According to Fitch Ratings, Shenzhen-registered CDB Leasing benefits in "business development and funding profile from China Development Bank's market position and explicit and implicit support from its parent".

When Peter Chang took the helm in 2017, CDB Aviation's lease exposure split was 70% in China and 30% international.

The focus on international leasing grew through the leadership of Patrick Hannigan and more recently, Jie Chen, with lease exposure reversing to roughly 28% in China and the rest international. 

CDB Leasing is the largest financial leasing company by owned assets and second-largest by managed assets under the supervision of the China Banking and Insurance Regulatory Commission. Its total owned assets were RMB342 billion ($54 billion) at year-end 2021. 

Aircraft leasing accounted for 56.3% of CDB Leasing’s total operating lease income through 31 December 2022. Leasing segment assets amounted to RMB93.4 billion, up from RMB84.3 billion the previous year.

However, CDB Aviation booked a RMB1.7 billion ($246 million) loss before income tax in 2022, following a RMB313 million pre-tax profit the previous year, primarily due to the significant increase in impairment loss on aircraft stranded in Russia.

Sources say CDB Leasing would likely be sold to a Shenzhen-based financial entity or government development company, with a small percentage of the Hong Kong SAR-listed entity retained by the policy bank.

The change in ownership from a policy bank is expected to reduce regulation and speed up financing decisions for CDB Aviation and the other leasing vehicles that make up the non-banking financial institution, with registered capital of RMB 9.5 billion, sources add.

Last year Airfinance Journal reported that there would be growing momentum for Chinese lessors to reshore businesses after leaders of the Communist Party of China gathered on 16 October for the most important event in China’s political calendar, and only the 20th such congress since the Communist Party was founded in 1921.

Inward focus

China's policy lending is carried out by China Development Bank, the Agricultural Development Bank of China and the Export-Import Bank of China. 

The government-backed banking trio has supported China’s Belt and Road Initiative, which backs infrastructure projects in various countries. 

The shift, however, will direct investment for China’s policy banks to the private sector and encourage them to extend credit to small businesses.

The world's second-biggest economy has struggled to recover fully six months after authorities ended Covid-19 restrictions that had been in place for three years. 

China cut its lending benchmark rates for the first time in 10 months on 20 June and moved ahead with monetary easing to help revive the economy, which is under pressure from worsening trade conditions and a weakening property sector. 

The one-year loan prime rate was lowered 10 basis points to 3.5% while the five-year rate was cut to 4.2% from 4.3%.

Still, China remains on track to hit its 2023 growth target of around 5%, but economists expect its  central bank to cut lending rates further and push through more stimulus measures to boost demand.

China Development Bank is China's largest policy bank and one of the world’s largest institutions supporting domestic and foreign infrastructure projects.  

It became the controlling shareholder of CDB Leasing in 2008 and later, in 2015, the lessor became a joint stock company. 

CDB Leasing includes aviation, shipbuilding, automobile, construction machinery, urban infrastructure, large equipment manufacturing, highways, rail transportation, affordable housing and small and medium enterprises.

Jie Chen took over as the CEO of CDB Aviation in Dublin in January this year. Before that, he served as an executive vice-president and managing director of Asia at Air Lease.

The lessor is due to announce the appointment of a chief investment officer soon after Yu Chen, the former deputy CEO and head of capital markets, moved into a non-executive role. 

In May, Airfinance Journal reported that Paul Boyle is leaving CDB Aviation after three years to join Saudi Arabian start-up lessor Avilease. 

Boyle served as the head of EMEA and will join Riyadh-based Avilease in a similar role.

CDB Aviation’s chief technology officer Brian Dowling also left his post to join Genesis Aviation. Dowling spent nearly six years at CDB Aviation and was the head of transactions from 2017 to 2020.

Also Ryan Barrett, who led the CDB Aviation commercial team across APAC until most recently, has accepted a role at Aviation Capital Group.