(Shenzhen Daily)
Updated: 2007-10-09 16:23

China Minsheng Banking Corp said it will buy 9.9 percent of San Francisco-based UCBH Holdings for more than $200 million in the first strategic investment by a mainland bank in a US bank.

Shares in Shanghai-listed Minsheng climbed as much as 3.1 percent as investors hoped the deal, its first major foreign investment, would eventually give the bank more access to burgeoning trade and investment flows between China and the US West Coast.

The deal may herald a string of strategic investments by cash-flush domestic financial firms in the United States and the rest of the world in coming months and years, a prospect which helped fuel a general surge in domestic bank shares yesterday.

"This may accelerate overseas acquisitions by Chinese banks this year," a source close to the China Banking Regulatory Commission, said on condition of anonymity.

He said the regulator had been informed of several similar deals that were expected to be finalized soon.

The United States and northeast and southeast Asia, particularly Japan, South Korea and Singapore, are the most attractive areas for Chinese banks because of large pools of ethnic Chinese clients there, the source added.

NASDAQ-listed UCBH owns United Commercial Bank, which focuses on the Chinese community in the United States and US firms with business in China. It had $10.7 billion of assets in June, making it one-tenth the size of Minsheng with assets of $112 billion.

Minsheng, the first private domestic bank to list on the Shanghai stock market, has an option to raise its stake to 20 percent by the end of June 2009, the company said.

Exercising the option would make Minsheng the biggest shareholder in UCBH, the Shanghai Securities News said.