China's two biggest banks sign $6B in deals
China's two biggest state-owned commercial banks have signed preliminary agreements to receive foreign investments worth a total of $6 billion, a press report and an official at one of the Chinese lenders said Wednesday, the Associated Press reported.
Investors including Goldman Sachs Group Inc., American Express Co. and Allianz AG of Germany signed a deal Tuesday to buy a 10 percent stake in China's biggest lender, Industrial & Commercial Bank of China, for more than $3 billion, said an official at the ICBC's Beijing headquarters, speaking on condition he not be named.
The official said the investment would be made after the bank is restructured as a stockholding company in mid-October.
"The MOU was signed yesterday morning, and Goldman has the largest share," he told Dow Jones Newswires, referring to a memorandum of understanding. "The deal isn't formalized, but I don't think it will change much."
Meanwhile, Singapore government-owned Temasek Holdings Pte. Ltd. was preparing to pay about $3 billion for about 10 percent of China's second-largest bank, Bank of China, the Asian Wall Street Journal reported.
Bank of China spokesman Wang Zhaowen said he could not confirm the report, and Temasek Holdings spokeswoman Eva Ho refused comment on it.
Foreign banks have been staking out strategic alliances in China, hoping to be well-positioned for the eventual full opening of the banking industry to foreign competition in late 2006. Chinese banks are being encouraged to seek such partnerships to help bolster their capital and improve management.
The newspaper said that according to the memorandum with ICBC, Goldman Sachs was investing between $1.7 billion and $1.8 billion in ICBC; Allianz would pay about $1 billion, while American Express would buy up to $300 million worth of shares.
The agreement values the Chinese bank at $30 billion, about on par with its end-June net asset value of 252.5 billion yuan ($31 billion), the report said.
Also on Wednesday, the state-owned Agricultural Bank of China, the country's fourth-biggest lender, signed an agreement on cooperation with the Italian banking group Capitalia SpA.
The pact involves sharing customer bases and developing further cooperation, the bank said in a statement on its Web site. Banca di Roma SpA, a unit of Capitalia SpA, confirmed the two sides would cooperate.
Earlier this month, the Royal Bank of Scotland Group PLC announced a $3.1 billion investment that will give the British bank control of a 10 percent stake in the Bank of China.
RBS is contributing $1.6 billion of the investment, giving it a direct stake of just over 5 percent. But it will also take control of the full 10 percent on behalf of co-investors Merrill Lynch & Co. and Li Ka-shing, the Hong Kong-based tycoon who controls the conglomerate Hutchison Whampoa Ltd.
Chinese law limits foreign shareholders to a total of not more than 25 percent equity share in its state-owned banks. Individual foreign banks can only hold up to 20 percent shares.
China wants to raise money to modernize its state-owned banking industry by selling minority stakes to foreign investors while retaining control of the institutions. All of its major commercial banks are planning to sell shares abroad.
On Tuesday, Bank of China announced it has chosen three foreign consultants to prepare for its overseas initial public offering: Bank of China International, the parent bank's Hong Kong-based investment bank, Goldman Sachs, and Swiss bank UBS AG.