Primary Dealers

CDB in talks for US$5b stake in Nigerian lender

PUBLISHED : Monday, 28 January, 2008, 12:00am
UPDATED : Monday, 28 January, 2008, 12:00am

China Development Bank, one of three policy banks that lend according to government directions, is in talks to pay more than US$5 billion for a minority stake in West Africa's largest financial services institution by asset value, according to a mainland media report.

The mainland lender hopes to gain some management say in Nigeria's United Bank for Africa, the Economic Observer quoted a source close to China Development Bank as saying.

'The focus of the talks is on the post-investment management structure, as well as CDB's wish to restructure the operations of UBA to lower loan risks, but the latter has not been agreed by UBA,' the source said.

The source also said Development Bank had agreed to invest in subprime-troubled Citigroup but the deal was stalled 'from the US side'.

Development Bank and UBA were not available for comment.

Media reports had suggested the mainland bank was looking to contribute US$2 billion towards an up to US$10 billion cash injection Citigroup was hoping to secure from investors, including Citigroup's largest individual shareholder, Saudi Prince Alwaleed bin Talal.

In July last year, Development Bank paid Euro2.2 billion (HK$25.21 billion) for a 3.1 per cent stake in British lender Barclays to help finance its failed takeover bid for Dutch bank ABN Amro.

Analysts said it was good timing for Development Bank to pick up overseas bank shares, after a slump in their valuations amid tens of billions of US dollars in provisions made for soured mortgage lending to US borrowers with poor credit histories.

'It is not surprising for CDB to seek acquisition opportunities abroad as global financial sector shares have fallen to relatively cheap levels,' said BOCI Research analyst Peter Pak.

'As a policy bank, it also has the role in facilitating Sino-African business dealings.'

Development Bank is the operator of Beijing's US$5 billion China-Africa Development Fund, which provides cheap financing to mainland firms investing in Africa.

Beijing is deepening its commercial relationships with many resource-rich African states, despite criticism such investments are bolstering some brutal political regimes.

Nigeria, the world's eighth-largest crude oil exporter, saw exports to China surge 98 per cent last year to 980,000 barrels. Although it accounted for only 0.5 per cent of the mainland's crude imports and its supply reliability was damaged by militant attacks, it could play a role in helping China reduce its reliance on oil from the Middle East.

UBA had US$9.92 billion of assets, US$8.1 billion of deposits and US$2.67 billion of loans at the end of last year, with a non-performing loan ratio of 4.4 per cent.

With 630 retail distribution outlets in Nigeria and eight branches in Ghana, the bank aims to quadruple profit before tax to US$1 billion in 2010 from US$246 million last year.


The deal would see Beijing building on ties for crude oil supplies

The surge in Nigeria's crude oil exports to the mainland last year: 98%