China Construction Bank (CCB) on Thursday inked an agreement with Bank of America (BOA) to acquire 100 percent of equity interest in Bank of America (Asia) Limited, the wholly owned subsidiary of BOA in Hong Kong.

Payable in cash, the acquisition is valued at 9.71 billion HK dollars (about US$1.24 billion), representing nearly 1.32 times of the book net assets of BOC (Asia) worth 7.38 billion HK dollars (about US$949 million).

The acquisition is subject to the approvals of the Chinese and overseas authorities and CCB shareholders in a general meeting.

Officials from CCB and BOA said that they expected the acquisition will be completed before the end of this year.

"Bank of America (Asia) shows little overlapping with CCB business in Hong Kong. Therefore, it is a very appropriate choice of acquisition for us," said Zhang Jianguo, the newly appointed CCB President.

After the acquisition, CCB's business in Hong Kong will more than double, and the total amount of customer loans will be the 9th highest in the Hong Kong banking industry, said Fan Yifei, vice president of CCB.

"The acquisition will immediately enhance the per share earnings of CCB," he noted.

Also on Thursday, CCB announced its 2006 interim results in Hong Kong. For the six months ending June 30, 2006, the bank reported operating income of 70.86 billion yuan (US$8.89 billion), up 12.6 percent over the same period last year.

Meanwhile, CCB scooped a net profit of 23.23 billion yuan (US$2.91 billion), jumping 13.3 percent over the corresponding period last year.

The bank's earnings per share stood at 0.10 yuan (about one US cent), while its non-performing loan ratio decreased from 3.84 percent at the end of last year to 3.51 percent.

"The acquisition deal has created a win-win situation for both parties," said a spokesman of CCB, noting that the deal will help CCB to expand its overseas presence and retail banking business.

Bank of America (Asia), locally incorporated with more than 90 years' history, is one of the longest established banks in Hong Kong. In 1992, the bank became part of BOA and has now 17 banking centers in Hong Kong and Macao.

One of the highest rated banks in Hong Kong, BOA (Asia) reported an after-tax net profit of 537 million HK dollars (US$69.2 million) in 2005.

CCB is China's third-largest commercial bank and was listed on the Hong Kong Stock Exchange in October last year.

"CCB will be developed into an integrated financial service provider in Hong Kong, with retail banking, wholesale banking, investment banking and insurance service as its pillar businesses," Zhang.

(Xinhua News Agency August 25, 2006)