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US investor to control Chinese listed bank
Updated: 2004-06-06 16:29

Newbridge Capital, the US-based investment giant, is to take control of a state-owned Chinese bank by purchasing about 18 percent of the bank's shares from its four state owners in a landmark deal, according to a bank announcement.

The deal on share transfer was expected to be signed soon, according to the announcement.

As unveiled in the announcement, the Shenzhen Development Bank Co. Ltd.'s four largest state shareholders will sell to Newbridge more than 348 million shares which they own, or 17.89 percent of the total shares. But how much the US firm will pay for the deal was unknown.

Newbridge will become the largest shareholder of the bank if the deal is carried out as planned.

The China Banking Regulatory Commission (CBRC), the watchdog of China's banking industry, recently revised its regulations over overseas investment in Chinese banks. The limit for shares that a single overseas investor can acquire in a Chinese bank has been lifted up to 20 percent from the previous 15 percent.

A Chinese bank in which overseas investors jointly hold no more than 25 percent shares remains a domestic one, and therefore its operations will remain free from limits that are imposed upon overseas banks, according to the regulations.

Although the Chinese bank, the earliest listed bank in the country, is a relatively small one in terms of capital, it has set up operational network across major cities in the Chinese mainland.

Moreover the bank possesses an authorized status to run all banking businesses and has huge potential in business expansion. They are the major initiatives that interested Newbridge, securities analysts said.

In the first quarter of 2004, the Shenzhen Development Bank saw robust growth and raked in a net profit of 214 million yuan (US$25.8 million), or 0.11 yuan (US$0.013) per share.

Newbridge Capital, an active strategic investor with registered capital of 724 million US dollars, has been successful in bank investment. In one of its successful acquisitions, it turned the First Bank of Korea, which had been losing more than US$1 billion annually, into a lucrative bank with a net profit of over US$300 million one year after it bought 51 percent shares of the bank.

Qualified overseas investors are welcomed to invest in China's banking sector, CBRC officials said. Other than capital, technologies and new types of financial services, a greater benefit brought about by overseas investors is advanced operational mechanism and management, which lends new ideas and operational skills to China's state-owned banks, according to CBRC officials.

The four state shareholders of the bank are Shenzhen Investment Management Co, Shenzhen International Trust Investment Co. Ltd., Shenzhen Social Insurance Co. and Shenzhen Urban Construction Development (Group) Co. Ltd.

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