BEIJING: China's fifth biggest lender has agreed to sell up to a fifth of its shares to HSBC, a bank regulator said yesterday, expanding the global bank's footprint in a market hoarding US$1.3 trillion in savings.
The sale of such a stake, seen worth around US$1bil, would be the largest by a local bank to a foreign investor as Beijing overhauls a sector bogged down with more than US$200bil in sour debt, the weak link in the world's sixth largest economy.
It would consummate HSBC's months long courtship of Shanghai-based Bank of Communications, once a note-issuing bank founded in the dying days of the Qing dynasty.
HSBC Holdings Plc, the world's second most valuable bank after Citigroup, got its start in Hong Kong and Shanghai in 1865. It remains one of the most aggressive players in a restrictive arena due to open to foreign banks in 2007.
It owns slices of the Bank of Shanghai and China's No. 2 life insurer, Ping An Insurance, which made its debut on the Hong Kong Stock Exchange yesterday after a US$$1.8bil IPO. Through its Hang Seng Bank, it also owns 15.98% of Industrial Bank Co Ltd.
Analysts estimate a Bank of Communications stake sale could be worth about US$1bil. But one said the lender might command twice as much.
Its loan book, dominated by major industrial clients such as Asia's top oil refiner Sinopec Corp, looked better than the Big Four's, they said.
In comparison, US private equity firm Newbridge Capital agreed to buy 18% of Shenzhen Development Bank for about 1.5 times book.
Both sides have basically reached an agreement on this, said Li Fuan, deputy head of the policy and regulation department at the China Banking Regulatory Commission.
The maximum stake (that) can be sold is 20%, he said, adding that the sale would need final approval from regulators. Reuters