Thursday, January 2, 2003
Citibank to pick up 5% in Shanghai bank
REUTERS
SHANGHAI: CITIBANK, a unit of US giant Citigroup, will buy 5% of Shanghai Pudong Development Bank in its first strategic partnership in the potentially huge China market, the Chinese bank said on Thursday.
The acquisition by the banking unit of the world's biggest financial group is one of many Sino-foreign tie-ups in the works as foreign banks ponder alliances in China, hoping to tap a gradually opening market and $1 trillion in personal savings.
Citibank and mid-sized Pudong Bank agreed to an exclusive cooperation pact in which each will treat the other as its sole strategic banking partner in China, Pudong Bank said in a statement published in official newspapers on Thursday.
It did not state a value for the acquisition, and executives at both banks declined to comment. They are scheduled to announce more details at a joint news conference at 0700 GMT.
"Citibank will buy 5% of our bank's total share capital as a long-term strategic investor and the acquisition has been approved by the government," Pudong Bank said in the statement, published in the Shanghai Securities News.
It was the first confirmation of the size of the stake after the tie-up was announced on Tuesday.Pudong Bank said the US bank's acquisition, which awaits shareholder approval, was just an initial purchase, but it did not elaborate.
"It's sensible to test the waters rather than jump right in," said Ryan Tsang, regional bank analyst with Standard & Poor's in Hong Kong.
"It's a relatively new market and everybody knows it's risky in terms of making loans and actually making money."
Analysts said Pudong Bank's main attraction was steady profitability over recent years and a growing branch network headquartered in Shanghai, China's richest city and economic hub.
Pudong Bank's non-performing loan ratio is also relatively low, at 5.2% at end-September. A stake in Pudong Bank would give Citigroup - which has century-old roots in China but only seven offices - access to about $26.6 bn in assets and 272 offices in China. Pudong Bank gains access to Citibank's global network and strong brand, as well as expertise in developing new products and risk management skills. The two would cooperate on credit cards, financial trusts, trademarks and other areas, Pudong Bank said.
Analysts said Citibank's minority stake was only the tip of the iceberg, and the US bank would forge a stronger long-term partnership.
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