Citigroup to boost stake in Shanghai Pudong Development Bank, Chinese lender says
SHANGHAI, China – U.S. financial services giant Citigroup Inc. said Tuesday it plans to increase its stake in China’s Shanghai Pudong Development Bank to 19.9 percent, the maximum legal holding for a single foreign bank in a local lender.New York-based Citigroup had earlier said it planned to expand its investments in China, including its 4.62 percent stake in the mid-sized Shanghai bank.Pudong Development Bank announced the agreement in a statement to the Shanghai Stock Exchange. It gave no financial details, but said the two banks recently signed an amendment to their earlier “strategic partnership” pact, calling for Citigroup to exercise its option to boost its stake to 19.9 percent.Citigroup’s Shanghai spokeswoman Marine Mao confirmed the announcement Tuesday, but said the bank had no comment and would disclose no details. Citigroup’s New York spokeswoman Shannon Bell confirmed that Citigroup was increasing its ownership share to 19.9 percent, but declined to give other details.Many foreign banks are boosting investments in China ahead of the full opening of its fast-growing banking market to foreign competition in late 2006. Regulations now limit a single foreign investor’s ownership to less than 20 percent, and combined foreign investment to 25 percent.Citigroup paid 600 million yuan ($72 million at the time) in early 2003 for a 5 percent stake in the Shanghai bank, whose nine other top shareholders are controlled by the city government. A share issue later diluted it to 4.62 percent.The two banks launched a joint credit card in early 2004, part of the U.S. bank’s effort to tap China’s fast-developing consumer credit market. The Chinese bank handles all transactions, and Citigroup provides technological and managerial advice.Citigroup is also reportedly leading a bid – with state-owned commodities giant China National Cereals, Oils & Foodstuffs Corp. – for a substantial stake in state-owned lender Guangdong Development Bank, a mid-sized lender based in the affluent southern province of Guangdong, near Hong Kong.The Guangdong bank’s relatively large load of bad debts and urgent need for funds have prompted regulators to offer foreign investors a majority stake, relaxing the usual limits, state media reports have said.Meanwhile, staff at Singapore’s state-owned Temasek Holdings Pte. Ltd. declined comment on reports it will pay $1.5 billion (euro1.26 billion) for a 5 percent stake in Bank of China, the country’s second-biggest lender.Chinese financial magazine Caijing said Bank of China’s largest shareholder – state-owned asset management company Central Huijin Investment Co. – had signed off on the deal after months of discussion.Temasek’s earlier offer, made in August, had been $3.1 billion (euro2.61 billion) for a 10 percent stake.Hong Kong’s South China Morning Post newspaper said Temasek also agreed to subscribe to another $500 million (euro421.6 million) worth of shares when Bank of China launches its initial public offering, expected early next year. It said China’s State Council, or Cabinet, had approved the plan.Bank of China spokesman Wang Zhaowen refused comment Tuesday.Foreign banks are eager to buy into China’s potentially lucrative market, despite the industry’s legacy of bad loans and mismanagement. Chinese regulators hope foreign institutions will improve local banks’ management and competitiveness.Meanwhile, the government has announced that 799 employees of state-owned banks were punished for illegal or unauthorized loans totaling 588.5 billion yuan ($73 billion; euro61 billion) following audits of 103 institutions.The reports gave no details. One case reported in state media involved the manager of a Bank of China branch in the northeastern city of Harbin, who is accused of fleeing the country after embezzling 290 million yuan ($36 million; euro30 million).