Print

Mail

wiki links

Citigroup to buy more shares of Pudong Bank

"The credit card business is a success story and that's where Citigroup has put most of its efforts so far."

Zhang Xi, analyst at Haitong Securities

Citigroup Inc, the world's largest financial institution, agreed to increase its stake in Shanghai Pudong Development Bank (上海浦東發展銀行) to 20 percent, the maximum allowed by China's regulators, the Chinese lender said.

Pudong Bank, China's second-biggest publicly traded lender, agreed to sell more shares to Citigroup, enabling the New York-based bank to increase its stake to 20 percent from 4.6 percent, Yang Guoping (楊國平), a spokesman at the Shanghai-based lender, said in a telephone interview yesterday. Stephen Thomas, a Shanghai-based Citigroup spokesman, declined to comment.

"This is a landmark decision for both banks," said Zhang Xi, a banking analyst at Shanghai-based Haitong Securities Co (海通證券).

"Pudong Bank is not content to be a regional lender. It needs Citibank's financial and technical support to survive and thrive in an environment where competition is becoming more and more intense," Zhang said.

Citigroup is betting that a tie-up with one of China's smaller banks will help it expand more quickly in the world's fastest-growing major economy than forging ties with one of the country's larger lenders. Citigroup, the largest minority shareholder in Pudong Development, bought 5 percent of the Shanghai-based bank in January 2003 for US$27 million.

Citigroup's stake was later diluted after Pudong Bank sold 2.54 billion yuan (US$315.5 million) of new shares. According to their earlier agreement, Citigroup holds an option to buy an additional 7 percent stake in Pudong by April. The agreement to increase the stake to 20 percent is yet to be approved by the regulator, Yang said.

Profit growth at the 13-year-old Pudong Bank may slow in the first half from a 34 percent rise in the same period last year after the government restricted lending to industries including steel and real estate.

Still, analysts expect a 20 percent growth in profit in the first six months as the lender may earn more from its credit card and other intermediary services.

Citigroup and Pudong Bank have been offering co-branded credit cards in Shanghai, Beijing, Tianjin and seven other cities in China. The dual-currency credit cards can be used in more than 300,000 outlets in China and more than 20 million outlets worldwide.

"The credit card business is a success story and that's where Citigroup has put most of its efforts so far," Haitong's Zhang said. "Now Citigroup wants to extend the cooperation and success to more areas."

The focal point of the alliance between Shanghai Pudong and Citigroup will be the development of a credit card business and it is intended that this business will apply to set up an equity joint venture in the future, according to a statement issued by the banks on Jan. 2, 2003.
This story has been viewed 1599 times.