ADB invests US$75 million in Bank of China
Updated: 2005-10-11 14:04
The Asian Development Bank plans to invest US$75 million in the state-owned Bank of China to help upgrade management at the Chinese lender.
Meanwhile, French bank BNP Paribas SA will take nearly a 20 percent stake in smaller lender Nanjing City Commercial Bank, the Chinese bank said.
Bank of China said the investment by the Manila, Philippines-based ADB, whose main duty is providing loans and economic aid to the region, was intended to help improve its management, in particular its internal risk controls and anti-money laundering procedures.
If the deal gains regulatory approval, it will give ADB a less than 1 percent stake in Bank of China.
Although similar to other recent foreign investments in Bank of China in that the ADB's stake cannot be sold for three years, this investment's modest size reflects the bank's unique position as a regional lender, an ADB official said.
"Our role is not to accumulate large stakes in banks," William Willms, ADB's Principle Investment Officer overseeing the bank's China investments, told Dow Jones Newswires. "Our goal is to put money on the table and help the invested companies in areas like corporate governance."
Beijing-based Bank of China is among several Chinese banks expected to launch overseas share offerings as they restructure and raise capital in preparation for the full opening of China's banking industry to foreign competition in 2006.
The market's positive reception to an initial public offering by state-owned China Construction Bank, whose shares will begin trading in Hong Kong later this month, has raised hopes for future listings. State media reports said earlier this week that Bank of China would launch its IPO next March or April.
Regulators have been encouraging foreign strategic investments in the state-owned banks. According to Chinese law, no single foreign bank can own more than 20 percent of any Chinese bank, with total foreign investment in each Chinese bank capped at 25 percent.
The deals announced this week follow a slew of much larger ones involving Bank of China. Last month, UBS, Switzerland's biggest bank, said it would pay 645 million Swiss francs, or US$500 million, in a partnership with Bank of China to develop investment banking and securities products and services in China.
That followed US$3.1 billion investments giving the Royal Bank of Scotland Plc and Singapore's Temasek Holdings Pte. Ltd. each 10 percent stakes in the Bank of China.
Nanjing City Commercial Bank said BNP Paribas would take an 18 percent to 19.7 percent stake by purchasing shares from current shareholders. The deal would give BNP one seat on the Chinese lender's board of directors, it said.
The purchases were expected to cost a total of about US$80 million (euro67 million), it said.
Since International Financial Corp., the private investment arm of the World Bank, holds a 15 percent stake in the bank, based in the eastern city of Nanjing, part of BNP's purchases would have to come from IFC.
The deal was approved at a shareholders meeting on October 9, the bank said.