French firm acquires almost 20pc of commercial lender in first foray into sector plagued by rising NPLs BNP Paribas is poised to sign a deal in Nanjing today to buy almost 20 per cent of Nanjing City Commercial Bank in the French lender's maiden commercial banking investment on the mainland. It will join a series of other foreign investors in tapping a sector with 28.81 trillion yuan of corporate and personal deposits, brushing aside signs of a new crop of non-performing loans in the aftermath of the macroeconomic tightening since last year. BNP Paribas would buy an 18 per cent to 19.7 per cent stake from existing shareholders of the Jiangsu-based lender, the Nanjing bank said yesterday, without disclosing a price. The amount is expected to include a stake of about 10 per cent sold by the International Finance Corp (IFC), the World Bank's private-sector investment arm which bought a 15 per cent equity interest in the mainland bank for US$27 million almost four years ago. Although Beijing has indicated it might lift the 25 per cent limit on combined foreign equity ownership in a mainland bank, it has given no firm timetable for the relaxation and a new ceiling. IFC is therefore reducing its holding to allow the mainland lender to bring in a genuine long-term strategic investor with a substantial equity interest in the bank before a long-speculated initial public offering. 'In the long run, that is in the best interest of the bank,' a source said. Foreign acquisitions in China's banking sector have increased this year in the lead-up to a deadline at the end of next year to fully open the heavily protected industry to foreign competition. The deadline comes under Beijing's commitments when it joined the World Trade Organisation in 2001. Nineteen foreign financial institutions have pumped US$16.5 billion into 16 mainland banks, Tang Shuangning, a vice-chairman of the China Banking Regulatory Commission (CBRC), told a forum at the weekend. More deals are planned or waiting for regulatory approval. The influx has been taking place against warnings of last year's macroeconomic tightening taking a toll on loan quality. Yesterday, Shenzhen's Securities Times newspaper quoted a CBRC study as projecting the creation of more than 30 billion yuan of new bank non-performing loans this year after the credit tightening on the overheating property sector and structural adjustments in the export sector. None of this has dampened investor interest in the Hong Kong initial public offering of China Construction Bank (CCB), the nation's third-largest lender by assets at the end of last year. The international placement tranche, accounting for 95 per cent of the 26.5 billion share offer, was more than five times covered yesterday after the launch of a roadshow on Wednesday last week, sources said. The demand prompted CCB and investment banks arranging the sale to raise the deal's indicative price range to between $1.90 and $2.40, from $1.80 to $2.25, effectively expanding the size of the total offer by 6.7 per cent at the top end to $63.6 billion. 'There is just too much liquidity in the world,' a source said. 'And any future appreciation of the yuan will provide downside protection for the stock.'