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  #1 Currin Strong on 11 May 13

   

  Citigroup pushes at the limits to foreign ownership in Chinese banks
  
  IN A manoeuvre confident to incite deadly fighting techniques the envy of its peers, Citigroup is poised to become the 1st foreign bank, and only the second foreign investor, to achieve manage of a Chinese lender. The American economic-services giant is major a consortium that has bid some 24 billion yuan ($3 billion) for an 85% stake in Guangdong Improvement Bank (GDB), a medium-sized bank from China's fairly wealthy south. Citigroup itself could own 40-45% of GDB if the deal proceeds, generating a mockery of guidelines limiting a single foreign investor in a Chinese bank to 20% and all foreigners to 25%.
  
  This would be a comeback for Citigroup, which for two years has had to sit and watch whilst rivals have grabbed strategic positions in the Chinese banking marketplace. In June 2005 Bank of America (BofA) beat Citigroup to a 9% stake in China Building Bank (CCB), a single of the country's four most close window significant lenders. Citigroup even lost a lucrative position advising on CCB's multi-billion-dollar flotation. This time it has moved more rapidly, outbidding ABN Amro, of the Netherlands, and France's Socit Gnrale for GDB. Even though Newbridge Capital, a private-equity firm, was the 1st foreign investor to gain management manage of a Chinese bank, its charge, Shenzhen Development Bank, is barely half the size of GDB, which had assets of 345 billion yuan at the finish of 2004.
  
  Citigroup is, even so, paying a higher value: 2.three instances book value, compared with the 1.15 instances BofA paid for its slice of CCB. True, acquirers often pay a premium for control. But GDB's monetary state is precarious. Its liabilities exceed its assets by 35 billion yuan (state subsidies have propped it up) its capital-adequacy ratio is way below international standards and its profitability is poor.
  
  In addition, to proceed with the deal Citigroup is being forced to restructure another, and at a value. In early 2003 the Americans bought four.6% of Shanghai Pudong Development Bank, a middle-sized lender that insiders say is proving a prickly companion. Citigroup promised then not to invest in one more mainland bank with no Shanghai Pudong's permission. That has been granted, but only on condition that Citigroup raise its stake in the Shanghai bank to 19.9% at a rumoured expense of $800m, 4 instances the original cost per share. Remarkably, Citigroup also had to agree not to set up a joint-venture with GDB in credit cards, China's most promising monetary organization and the only 1 the Guangdong bank seems to be any very good at.
  
  Nonetheless, Citigroup's rivals will certainly cry foul. By last October, 22 foreign banks had spent $16.5 billion on stakes in 17 mainland lenders, but had gained small true influence. The Chinese authorities will argue that GDB's poor state and smallish size make it an exception. And Liu Mingkang, the banking regulator, gave warning final month that must foreigners be granted far more visit my website than a quarter of a Chinese bank, that bank would then be regarded foreign, topic to restrictions that, amongst other items, permit yuan-denominated organization in only a couple of cities. Nonetheless, he will now come below pressure to raise the caps on foreigners' stakes. That might allow the likes of HSBC, with 19.9% in BoCom, a larger and far sounder bank than GDB, to acquire genuine management handle. Inadvertently, Citigroup's coup may end up profiting its rivals a lot more than itself.
  
  Pay a visit to to find cost-free ebook
  
  clip
  
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  <div class="cArrow"> </div><div class="cContentInner">Citigroup pushes at the limits to foreign ownership in Chinese banks <br /> <br /> IN A manoeuvre confident to incite <a href="http://yiquan.chinamartialarts.net/lizhaoshanduanshou-ebook.htm" rel="nofollow">deadly fighting techniques</a> the envy of its peers, Citigroup is poised to become the 1st foreign bank, and only the second foreign investor, to achieve manage of a Chinese lender. The American economic-services giant is major a consortium that has bid some 24 billion yuan ($3 billion) for an 85% stake in Guangdong Improvement Bank (GDB), a medium-sized bank from China's fairly wealthy south. Citigroup itself could own 40-45% of GDB if the deal proceeds, generating a mockery of guidelines limiting a single foreign investor in a Chinese bank to 20% and all foreigners to 25%. <br /> <br /> This would be a comeback for Citigroup, which for two years has had to sit and watch whilst rivals have grabbed strategic positions in the Chinese banking marketplace. In June 2005 Bank of America (BofA) beat Citigroup to a 9% stake in China Building Bank (CCB), a single of the country's four most <a href="http://yiquan.chinamartialarts.net/shili.htm" rel="nofollow">close window</a> significant lenders. Citigroup even lost a lucrative position advising on CCB's multi-billion-dollar flotation. This time it has moved more rapidly, outbidding ABN Amro, of the Netherlands, and France's Socit Gnrale for GDB. Even though Newbridge Capital, a private-equity firm, was the 1st foreign investor to gain management manage of a Chinese bank, its charge, Shenzhen Development Bank, is barely half the size of GDB, which had assets of 345 billion yuan at the finish of 2004. <br /> <br /> Citigroup is, even so, paying a higher value: 2.three instances book value, compared with the 1.15 instances BofA paid for its slice of CCB. True, acquirers often pay a premium for control. But GDB's monetary state is precarious. Its liabilities exceed its assets by 35 billion yuan (state subsidies have propped it up) its capital-adequacy ratio is way below international standards and its profitability is poor. <br /> <br /> In addition, to proceed with the deal Citigroup is being forced to restructure another, and at a value. In early 2003 the Americans bought four.6% of Shanghai Pudong Development Bank, a middle-sized lender that insiders say is proving a prickly companion. Citigroup promised then not to invest in one more mainland bank with no Shanghai Pudong's permission. That has been granted, but only on condition that Citigroup raise its stake in the Shanghai bank to 19.9% at a rumoured expense of $800m, 4 instances the original cost per share. Remarkably, Citigroup also had to agree not to set up a joint-venture with GDB in credit cards, China's most promising monetary organization and the only 1 the Guangdong bank seems to be any very good at. <br /> <br /> Nonetheless, Citigroup's rivals will certainly cry foul. By last October, 22 foreign banks had spent $16.5 billion on stakes in 17 mainland lenders, but had gained small true influence. The Chinese authorities will argue that GDB's poor state and smallish size make it an exception. And Liu Mingkang, the banking regulator, gave warning final month that must foreigners be granted far more <a href="http://yiquan.chinamartialarts.net/Wangyufang.html" rel="nofollow">visit my website</a> than a quarter of a Chinese bank, that bank would then be regarded foreign, topic to restrictions that, amongst other items, permit yuan-denominated organization in only a couple of cities. Nonetheless, he will now come below pressure to raise the caps on foreigners' stakes. That might allow the likes of HSBC, with 19.9% in BoCom, a larger and far sounder bank than GDB, to acquire genuine management handle. Inadvertently, Citigroup's coup may end up profiting its rivals a lot more than itself. <br /> <br /> Pay a visit to to find cost-free ebook <br /> <br /> clip <br /> <br /> on the internet</div>

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