Citigroup looks for more bank stakes

PUBLISHED : Saturday, 10 September, 2005, 12:00am
UPDATED : Saturday, 10 September, 2005, 12:00am

US giant eyes Guangdong lender as it seeks to boost presence in the mainland

Citigroup is on the prowl for more investment targets to aid its expansion in mainland banking, a senior executive said yesterday at the World Economic Forum in Beijing.

The world's biggest financial institution is believed to be among more than 10 domestic and international investors exploring a possible investment in Guangdong Development Bank.

It also has plans to take a stake in another Chinese bank to tap further into the mainland sector's 28.37 trillion yuan of corporate and private savings, after buying 4.62 per cent of Shanghai Pudong Development Bank in 2003 for US$72 million.

'We are very actively talking with Chinese financial institutions,' Citibank chairman William Rhodes said yesterday. 'China is our No1 investment destination globally.'

He confirmed that the banking giant's talks to raise its Shanghai Pudong stake to 19.9 per cent are expected to come to a resolution in the coming months. That will lift its interest to the ceiling for a single foreign investor's equity in a mainland bank and make it the biggest single shareholder. Based on Pudong's share price, the deal will cost about five billion yuan.

An early acquirer of mainland banking stakes, Citigroup has fallen behind British rival HSBC, which last year bought a 19.9 per cent stake in Bank of Communications.

Earlier this year Citigroup lost a bid to become an investor in China Construction Bank, China's third-largest lender, to Bank of America Corp and Singapore government-backed Temasek Holdings.

The failure was linked to the fact it dropped its investment banking unit from the main underwriting team for the mainland lender's Hong Kong initial public offering.

Citigroup's interest in Guangdong Development Bank appears to reflect its desire for a larger stake in a second-tier bank rather than gaining a small interest and little control in a top lender.

The Guangdong bank is selling a controlling interest to domestic and foreign investors, and regulators are believed to be considering a plea to lift the 25 per cent ceiling on combined foreign interest in a mainland bank to help the lender attract international investment.

But sources suggest the bank may settle for selling stakes to a pair of investors, including one domestic and one international buyer, to keep foreign equity interest within the regulatory limit.

Guangdong, its financial adviser BOC International and share sale coordinator Deutsche Bank, are reviewing initial bids submitted by up to 18 suitors next Monday. Five or six front runners will be selected by Tuesday to participate in the next round of bidding.

Singapore's DBS, China's second-largest life insurer Ping An Insurance, JP Morgan Partners, and Carlyle Group are also believed to be in the running for a stake.

A Hong Kong-based Citigroup spokesman declined to comment yesterday.