| Citigroup to hike stake in Pudong Bank, plans investment in Guangdong Bank |
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SHANGHAI: World's No 1 bank Citigroup Inc. says it is increasing its stake in China's Shanghai Pudong Development Bank to 19.9 per cent, the maximum holding allowed under the prevailing law for a single foreign bank in a Chinese bank.
Shanghai Pudong Development Bank disclosed this in a regulatory statement to the Shanghai Stock Exchange but gave no details of the terms. The two banks have signed an amendment to their strategic partnership agreement, which provides for Citigroup to exercise its option to increase the stake to the maximum permissible level.
A spokesperson for Citigroup in Shanghai confirmed the announcement but did not elaborate.
China is all set to further open its banking sector to foreign players in late 2006 and there is a scramble now among foreign banks to maximise their existing holdings. Chinese regulations now allow a single foreign investor to have less than 20 per cent of the holdings in a bank and the combined foreign investment in the country is not to exceed 25 per cent.
While Citigroup acquired the 5 per cent holding in Shanghai Pudong Development Bank for $70 million (the holding was brought down to 4.62 per cent following a subsequent share issue), it had agreed that it will not invest in another domestic bank. However, Pudong Development Bank's board, at a meeting on 22 December, decided to drop that condition. This decision is also disclosed in the regulatory filing, which said the two parties agreed to terminate all the exclusivity agreements signed previously.
The exclusivity clause would have prevented Citigroup from going ahead with its proposed investment in Guangdong Development Bank -- nearly $1.5 billion for up to 50 per cent holding in the bank. Guangdong Development Bank is one of China's most troubled banks.
Citigroup said it has no comment on this issue. The bank's spokesperson in Shanghai said, "We have no further comment on the matter apart from what is disclosed in Pudong Development's statement".
Citigroup trails banks like HSBC in exploiting China's banking sector, the savings bank component of which itself is estimated to be huge. HSBC paid $1.75 billion for 19.9 per cent of Bank of Communications and bought 8 per cent of Bank of Shanghai in 2001.
Royal Bank of Scotland too has a stake in Bank of China with an investment of $1.6 billion for a 5.16 per cent holding.
Posted
on : Wed, 28 Dec 2005 08:05 GMT | Banking News
By : Mark Richardson
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