Goldman Sachs sells US$2.5b stake in ICBC

PUBLISHED : Tuesday, 17 April, 2012, 12:00am
UPDATED : Tuesday, 17 April, 2012, 12:00am


Related topics

Goldman Sachs' move to sell shares of Industrial and Commercial Bank of China to Singaporean sovereign wealth fund Temasek yesterday could be followed by gradual divestment of its remaining stake worth about US$3 billion in the coming years, analysts say.

Goldman sold US$2.5 billion, or about 40 per cent of its H-share holding, through a block trade at HK$5.05 per share. About US$2.3 billion of the shares went to Temasek.

Goldman posted a loss in Asia last year, partly because of its stock-market losses in ICBC, said a source, adding that the Wall Street bank 'has no plans to sell anymore ICBC shares in the immediate future'.

Goldman said in its annual report its investment in ICBC posted a US$517 million pre-tax loss last year.

This is the fourth time the US firm has sold shares in China's largest bank since 2009. The latest sale cuts its holding to less than five billion shares, or 5 per cent.

Temasek yesterday said it bought 3.55 billion ICBC H shares from Goldman, lifting its interest in the bank to about 5.3 per cent of H shares, or 1.3 per cent of the total share base.

Goldman could continue to sell down its ICBC stake to preserve capital, said Jim Antos, a senior analyst at Mizuho Securities.

Goldman bought its shares in ICBC at HK$3.07 each during the lender's initial public offering. At yesterday's close of HK$5.17, the latest sale would mean a profit of 68 per cent, Antos said.

He said that in the aftermath of the financial crisis, Goldman changed its legal and regulatory status from a broker dealer to a bank holding company, which makes it liable for a capital charge on its investments in financial companies. Selling bank stocks eases that expense.

Stanley Li, an analyst at Mirae Asset Securities, said Goldman's sale of ICBC shares was likely to continue under Volker's Rule, introduced after the financial crisis to control the risks associated with the financial sector. The rule restricts Goldman's ability to bet its own money by restricting proprietary trading.

Temasek has been increasing its holdings in Chinese lenders in the past year as Western banks shed non-core assets to either boost capital or restructure business.

Temasek bought 4.4 billion shares of China Construction Bank after Bank of America sold about 5 per cent of its holdings in August last year. It also bought 97.11 million shares of Bank of China in August, lifting its stake to 7.07 per cent.

ICBC closed 0.77 per cent lower yesterday, after rising to HK$5.21 in the previous two trading days.

Analysts said the trend of foreign banks trimming their stakes in Chinese banks could continue because of tighter regulations both on the mainland and abroad. Citibank recently sold all its investment in Shanghai Pudong Development Bank.

The sell-downs mark a departure from the days when foreign and Chinese banks were eager to develop so-called win-win deals in 'strategic partnerships' in the early 2000s.

Xia Bin, a former central bank adviser, recently questioned the notion of such strategic partnerships.

'They will move their money out of China when they're struggling - regardless of whether they have a strategic partnership or not [with Chinese banks],' Xia said.


The original size of Goldman Sachs' stake in Industrial and Commercial Bank of China