BNP Paribas plans to increase its stake in Bank of Nanjing to as much as 20pc

France's largest lender may increase its stake in Bank of Nanjing to 20pc, the maximum allowed

PUBLISHED : Friday, 14 December, 2012, 12:00am
UPDATED : Friday, 14 December, 2012, 3:00am

BNP Paribas, France's biggest lender, plans to increase its stake in Bank of Nanjing to as much as 20 per cent as Chinese lenders' profits defy the global economic slowdown and rise to a record.

The French bank would buy the shares in the secondary market to boost its holding from about 15 per cent to closer to the maximum allowed under Chinese law, China chief executive officer Clarence T'ao said. A 5 per cent stake would cost about US$200 million at Bank of Nanjing's current share price.

Investing in local lenders has reaped bigger profits for foreign banks, including Goldman Sachs Group, than running their own franchises in the world's second-largest banking market. The Western firms' gains on the stakes are set to exceed their investments with more than US$20 billion in holdings remaining even after recouping about US$24 billion over the last three years, Bloomberg data shows.

"We've always adopted a more strategic approach to our investments in Bank of Nanjing," T'ao said. "It's not surprising that you see the bank actually trying to get back to a higher level."

BNP Paribas bought 19.2 per cent of the Chinese lender in 2005, two years before the bank's initial public offering diluted that stake to about 12.7 per cent. The Paris-based lender purchased an additional 2 per cent stake from October 10 through to December 6, Bank of Nanjing, based in the eastern city for which it is named, said this month.

Global banks and financial institutions as well as Singaporean investor Temasek ploughed a combined US$33 billion into Chinese banks from 2001 to 2009, according to data compiled by the nation's banking regulator.

Goldman Sachs, which in 2006 invested about US$2.58 billion of its own and client funds in Beijing-based Industrial and Commercial Bank of China, has since recorded more than US$3.1 billion of gains on its proprietary holding, according to company filings.

The New York-based bank does not disclose the size of the gains made by its investment funds from ICBC, the world's most profitable lender.

Such profits overshadow the US$10 billion that global banks have jointly earned over the past decade from the US$27 billion they have spent on building their own franchises in China, the regulator's data show.

Overseas banks have 387 branches in China, compared with about 66,600 operated by the five largest state-owned lenders led by ICBC. The foreign firms held just 1.6 per cent of the nation's 83 trillion yuan (HK$102 trillion) of deposits and made 1.7 per cent of its 58 trillion yuan in loans, the China Banking Regulatory Commission said.