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)
