The China
Construction Bank (CCB) says it has agreed to sell a 9 percent
stake worth US$3 billion to the Bank of America (BoA), making the
US bank the largest single foreign investor in China's banking
sector and an important strategic investor.
According to an agreement signed in Beijing on Friday, the BoA
will spend US$2.5 billion buying stakes from the Central Huijin
Investment Co?-- the largest shareholder of CCB?-- and
buy US$500 million of shares later this year in CCB's initial
public offering.
It will also have an option to buy additional shares in the
future to increase its ownership in CCB to 19.9 percent.
China has been taking a raft of measures including
restructuring, and trying to list shares of its major state-owned
lenders to strengthen the banking system before foreign competitors
can enter the market without restrictions before the end of next
year under WTO rules.
Kenneth Lewis, BoA chairman and chief executive officer, said
the investment was aimed at creating a long-term benefit by
partnering with the best positioned bank in China, which is one of
the fastest growing economies in the world.
As part of the program, BoA will provide about 50 personnel to
advise CCB in areas such as corporate governance, risk management
and retail banking, Lewis said. It will also have a seat on CCB's
board of directors.
CCB Chairman Guo Shuqing said the deal was a win-win
partnership.
"The most fundamental and challenging task in transforming CCB
is to establish a customer-centric and market-driven culture," Guo
said. "We have much to learn from our partner in serving customers
and creating shareholder value."
The CCB said it plans to bring in up to three strategic
investors. But he refused to give further details as the
discussions are still going on. Guo confirmed that his bank will
try to get listed before the end of this year.
Spokesman Fan Yifei said earlier that the bank will list in Hong
Kong first, and then in Shanghai and other markets.
The bank, which won US$22.5 billion capital injection from the
State in late 2003, was chosen by the government as a pilot in its
shareholding reforms. Last September, the bank was split into two
parts?-- China Construction Bank Corporation and China
Construction Bank Investment Co Ltd. The former, a joint stock
listing vehicle, continues to operate banking business.
The joint stock firm, with a registered capital of 194.23
billion yuan (US$23.4 billion), has five founding
shareholders?-- the Central Huijin Investment Co, Baosteel
Iron and Steel Co Ltd, State Grid Corp, Yangtze Power and China
Construction Bank Investment Co Ltd.
The CCB's major business indicators are close to the medium and
higher levels of the world's top 100 banks. Last year, the bank's
pre-tax profit hit 50.2 billion yuan (US$6 billion), a rise of
34.01 percent over 2003.
By the end of last year, the bank's non-performing loans dropped
to 3.92 percent, while its capital adequacy ratio increased to
11.29 percent.
(China Daily June 18, 2005)