The Royal Bank of Scotland (RBOS) is
"almost certain" to become a strategic investor in the Bank of
China (BOC),
a bellwether leading China's banking reform, the Economic
Information Daily reported on Monday.
The Xinhua-run newspaper quoted unidentified BOC sources as saying
that the two have not made an official announcement because
differences remain on "concrete prices."
China is overhauling its state banks, including the BOC, ahead of
the World Trade Organization-mandated opening of the country's
financial market to more sophisticated overseas rivals by the end
of 2006.
Financial regulators have requested that domestic banks join hands
with foreign institutions to initiate shareholding reform and stock
market debuts, citing that cooperation with overseas firms are
expected to bring about the state-of-the-art management that
domestic banks badly need.
The BOC hopes to ride on RBOS's retail business advantages, the
paper said.
As the second biggest bank in Europe, RBOS has an extensive network
of outlets serving individual clients and typically does well in
the housing and auto lending businesses. Its expertise would be a
big boost to BOC, which hopes to raise the proportion of its retail
business to 50 percent from the present one-third.
BOC's core competitiveness lies in its foreign exchange business
serving more than 50 percent of domestic foreign-funded enterprise
borrowers. Retail business, however, has long been its "soft
rib."
Zhu Min, a BOC assistant president responsible for restructuring
and listing, said the bank's strategic investor should be
"complementary in business, with no direct competition with the
BOC."
"The investor should be an international financial consortium that
boasts a sharpened competitive edge in a certain area -- which is
exactly the course of BOC's development trend," Zhu said.
The Economic Information Daily reported that Swiss bank,
UBS, Singapore-based Temasek Holdings, and an investment bureau
under Kuwait's ministry of finance are also talking with BOC about
possible stakes.
But they cannot be called "strategic investors" even if they
succeed in buying into BOC -- after all, their stakes might be much
smaller than that of RBOS.
Under Chinese law, foreign investors may own up to 25 percent of a
Chinese bank, but any single investor may not hold more than 20
percent.
UBS said in June that it planned to invest approximately US$500
million in BOC, but the paper revealed that it might increase its
investment to US$1.266 billion for a 5 percent stake.
The investment hike will be a helping hand for UBS to obtain the
underwriting rights for BOC's initial public offering, the paper
said.
Temasek said earlier it would invest US$1 billion in China
Construction Bank (CCB), another of China's "Big Four," which also
include the Industrial and Commercial Bank of China and
Agricultural Bank of China. CCB is also scheduled to go
public.
(Xinhua News Agency August 9, 2005)