China Construction Bank on the prowl for European lender

China Construction Bank surprised its industry peers and bank analysts yesterday with a disclosure by the bank's chairman that the mainland's No1 property lender might spend as much as 100 billion yuan (HK$122.5 billion) to acquire a stake in a European bank.

Wang Hongzhang, chairman of Beijing-based China Construction Bank (CCB), told British newspaper the Financial Times that the mainland's second-largest bank by assets may buy all of its target, or 30 to 50 per cent of a larger institution. Wang did not name a specific target, but he noted that an investment in Britain, Germany or France would be most attractive.

If such a deal takes place, it would become the largest-ever overseas acquisition by a Chinese bank. A CCB spokesman declined to comment.

The disclosure comes on top of a US$15.1 billion bid in July by Hong Kong-listed Chinese oil giant CNOOC for Canada's Nexen, the largest overseas acquisition so far announced by a Chinese company. That deal is awaiting regulatory approval.

But investors were not impressed that CCB may be on the prowl. The price of CCB shares - dual-listed in Shanghai and Hong Kong - ended flat at HK$5.17 each in Hong Kong in a firmer overall market, and were down 1.25 per cent to close at 3.94 yuan each in Shanghai, where the broader market dropped more than 2 per cent yesterday.

Immediate speculation centred on Britain's Royal Bank of Scotland (RBS) and Germany's Commerzbank as acquisition targets. Loss-making RBS is already majority-owned by the British government. Commerzbank is Germany's second-largest and 25 per cent-owned by the German government. RBS and Commerzbank both declined to comment.