Citigroup Inc’s plans to join an exodus of global banks from stakes in Chinese lenders leaves the focus on HSBC Holdings PLC, the only one with a major holding in a big bank after earlier exits by the likes of Bank of America Merrill Lynch and Goldman Sachs Group Inc.
Citigroup is seeking buyers for its 20 percent stake in China Guangfa Bank Co (中國廣發銀行) after the Chinese lender scrapped plans to list in Hong Kong, people familiar with the matter said yesterday.
In 2006, New York-based Citigroup led a consortium of five companies to purchase an 85.6 percent stake and operational control in Guangfa, a provincial bank formerly called Guangdong Development Bank (廣東發展銀行), for 24.27 billion yuan (US$3.82 billion at the current exchange rate).
Two of the investors — China Life Insurance Co (中國人壽) and Citic Trust Co (中信信託) — are among the companies in negotiations to buy Citigroup’s minority stake, the Wall Street Journal reported on Thursday, citing people familiar with the matter.
Other investors included IBM Corp and Yangpu Puhua Investment & Development Co (洋浦普華投資發展), the report said.
Earlier this month, Deutsche Bank AG signaled it might sell a US$3.5 billion stake in Huaxia Bank Co (華夏銀行) after saying it “no longer considers this stake to be strategic.”
While requirements to hold extra capital against such investments have encouraged foreign lenders to sell their stakes, HSBC is yet to give any signal that it is planning any similar move for its 19 percent stake in Bank of Communications Co (Bocom, 交通銀行).
The UK-based lender is instead boosting its bets on China, saying that it would add 4,000 jobs in the Pearl River Delta region over the next three to four years.
“HSBC is different because its focus is in Asia and China is a big part of its global strategy,” Shenzhen-based Guotai Junan Securities Co (國泰君安證券) analyst Richard Cao (曹柱) said. “HSBC’s tie-up with Bocom has brought it decent dividend income, a client base and improved brand awareness.”
While HSBC’s own operation in China faces restrictions as a foreign bank, Bocom does not because it is local, Cao added.
HSBC bought its stake in Bocom, the nation’s fifth-biggest lender, for US$1.75 billion in 2004. It is now worth almost US$13 billion.
Bocom is forecast to report a decline in profit for this year in a cooling economy where bad loans are rising.
HSBC chief executive Stuart Gulliver this month said that he remains optimistic about the Chinese economy and will increase the bank’s investment in the nation.
Shanghai-based Bocom plans to let HSBC name a vice chairman to its board as part of a plan to restructure its ownership, people with knowledge of the matter said in August.
HSBC in Hong Kong declined to comment on the outlook for its Bocom stake.
China caps foreign ownership of a Chinese bank at 25 percent, with a single foreign investor to have no more than 20 percent, making it harder for foreign investors to have any meaningful influence on operations.
Earlier this month, Shanghai-based Sinolink Securities Co (國金證券) analyst Ma Kunpeng (馬鯤鵬) said that the tie-up between HSBC and Bocom was unusual because of the depth of cooperation and was a link that seemed to be “unbreakable.”
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