ICBC buys 60 pc of Standard Bank's markets unit

Chinese lender looks to expand in commodities and currency trading through the US$765m deal to acquire the London-based operations

PUBLISHED : Thursday, 30 January, 2014, 5:01am
UPDATED : Thursday, 30 January, 2014, 5:01am

Industrial and Commercial Bank of China, the world's most profitable lender, agreed to pay about US$765 million for 60 per cent of Standard Bank's markets unit to expand in commodities and currency trading.

Standard Bank, Africa's largest lender, was also granting ICBC a five-year option to acquire a further 20 per cent stake in the London-based business, a statement said yesterday. If that option is accepted, Standard Bank can require ICBC to buy the remaining shares within about five years.

The purchase will advance ICBC chairman Jiang Jianqing's target of tripling the contribution of overseas earnings to 10 per cent by 2016 as the bank follows corporate clients expanding abroad and seeks to tap demand for yuan-denominated goods and services. Since 2007, ICBC has spent about US$7 billion on more than 10 acquisitions from South Africa to the United States.

The sale will also help Standard Bank, based in Johannesburg, renew its focus on its home continent as it withdraws from other emerging markets. The lender has been selling assets outside Africa since 2011 to raise cash for expansion in the world's fastest-growing region after developing Asia.

"[The sale] will lead people to possibly re-evaluate their views on Standard Bank South Africa because there will be less drag from capital tied up in London," said Johann Scholtz, the head of research at Afrifocus Securities. "It's obviously beneficial from a profitability point of view for Standard Bank, and it removes uncertainty."

Standard Bank said the purchase price of about US$765 million was based on the unit's net asset value of US$1.41 billion at the end of June. The stock has declined 5.7 per cent this year.

ICBC bought a 20 per cent stake in Standard Bank for US$5.4 billion in 2007, making it China's biggest overseas purchase at the time. In 2012, the Chinese lender acquired 80 per cent of Standard Bank's Argentine unit. Standard Bank earlier this month named former ICBC president Yang Kaisheng as deputy chairman.

Standard Bank's global markets unit formed part of the lender's corporate and investment banking division. The global markets team, with some staff in London, offered the bank's clients trading and other services involving foreign exchange, interest rates, credit, equities and commodities.

ICBC's interest in expanding in London comes after the Bank of England said in November that it was ready to help create a yuan clearing bank there as the city sought to become an offshore hub for trading the currency.