By Hu Yuanyuan (China Daily)
Updated: 2008-03-01 09:14

National Australia Bank (NAB) on Friday completed its purchase of a 20 percent stake in Union Trust and Investment Limited (UTI), making it the first foreign investment in China's trust sector.

The investment by nabCapital, NAB's capital markets and institutional banking division, makes the bank the third largest shareholder in UTI. Neither party revealed the price for the transaction.

"With UTI's focus on property this deal represents an opportunity for NAB to bring our expertise in structured financing to China's burgeoning market," nabCapital's CEO John Hooper said.

As one of the largest listed financial institutions on the Australian Stock Exchange, NAB is accomplished in structured property finance, which brings together property, finance, equity capital markets and cooperative finance.

"Our cooperative venture will concentrate on developing new products, particularly in infrastructure and construction - two tremendous growth areas in China," Hooper said, adding the bank will have a chair on UTI's board and several other top management members in charge of risk management.

Despite the recent correction in China's property market, Hooper is still quite optimistic about the country's real estate sector, but shows little interest in investing in China's banking sector.

"For the time being, we have no plan to buy a stake in China's commercial banks," he said, but added NAB would like to be a more "active" investor in the banking sector.

One of the largest attractions of UTI, Hooper said, is the company is relatively small, with high growth potential and sound corporate governance.

According to Wang Xichao, UTI chairman, the partnership will help the company explore creative businesses in QDII, infrastructure trusts, pension products, REITs and real estate trust funds.

"More importantly, NAB will help enhance our corporate governance and risk control," Wang said.

With a registered capital of 510 million yuan, UTI is one of the country's best-run trust companies.

In 2006, the company was one of two trust companies approved by the central bank to run REITs, on a pilot basis.

It currently has six shareholders, following the acquisition.