Citibank seeks 19.9% of Shanghai lender
By Hu Yuanyuan (China Daily)
Updated: 2005-08-26 06:13

SPDB is also currently planning to sell its State shares. "The earlier this process finishes, the better our financing plan will move on," said Shen.

According to Yang Qingli, an analyst with CITIC Securities, Citibank's stake expansion has nothing to do with SPDB's on-going State shares reform.

Dong Chen, an analyst with China Securities, shared Yang's viewpoint. "Citibank will suffer no loss after SPDB sells its State shares. On the contrary, it is expected that SPDB's market capitalization would rise."

Another analyst who did not want to be named told China Daily: "Citibank's move is also a response to its global rivals who are accelerating their investment in China."

Earlier this year, HSBC raised its stake in Ping An Insurance Company of China from 9.99 per cent to 19.9 per cent. Meanwhile, it also has a 19.9 per cent stake in Bank of Communications (BoCom).

In March, ING bought 19.9 per cent of the shares of Bank of Beijing. DBS and Deutsche Bank also plan to purchase 10 billion shares in Guangdong Development Bank (GDB).

"Foreign investors are stepping up their investment in China but they are more interested in joint stock banks because they can gain control," Wang Yuanlong, a senior economist at Bank of China, said. Foreign institutions can turn around smaller banks and make them profitable in a short period if they manage to get control.

The CBRC stipulates that 20 per cent is the highest a single foreign investor can hold in a domestic bank; and combined, foreign shareholders cannot control more than 25 per cent.

Currently, only US equity fund Newbridge Capital has a controlling stake in a Chinese lender, after it bought 17.9 per cent of Shenzhen Development Bank last October.