Britain-based Hongkong and Shanghai Banking Corp (HSBC) and Hong Kong's Shanghai Commercial Bank became the first two overseas banks to take stake in a Chinese mainland bank on Saturday.
HSBC bought 8 percent in the Bank of Shanghai for 518 million yuan (US$62.6 million), while Shanghai Commercial Bank bought 3 percent for 194 million yuan (US$23.4 million).
International Finance Corp, the World Bank's private investment arm, paid 204 million yuan (US$25 million) to increase its stake in the Bank of Shanghai from 5 percent to 7 percent.
Other shareholders, including Shanghai municipal and district governments and Shanghai-based State-owned enterprises, also increased their investment.
Through selling new shares, the Bank of Shanghai increases its registered capital to 2.6 billion yuan (US$313 million) from 2 billion yuan (US$241 million).
With a total of 18 per cent of the company owned by overseas financial institutions, the Bank of Shanghai is the first bank on the mainland to absorb equity investment from overseas banks.
"The move enables us to share HSBC's global network and its advanced management and sales expertise. I have full confidence in the long-term and comprehensive cooperation between the Bank of Shanghai and HSBC," said Fu Jianhua, Bank of Shanghai president.
HSBC can nominate a candidate for director, but HSBC Chairman David Eldon said they are not going to assign management staff to the Bank of Shanghai.
"The stake acquisition reflects our confidence in the future of the Bank of Shanghai and the economic potential of China," Eldon said.
HSBC's stake in the Bank of Shanghai will complement its existing operations, with two banks focusing on different market segments, he said.
As part of the agreement, HSBC will provide technical help in areas such as product development and risk control.
The Bank of Shanghai was established in China's financial hub in 1995 through a merger of urban credit cooperatives in the city.
As of last week, the Bank of Shanghai had assets of 118.1 billion yuan (US$14.2 billion) - a 309 percent increase since 1995. Its deposits stood at 105.6 billion yuan (US$12.7 billion). Its loans stood at 55 billion yuan (US$6.6 billion).
It now owns 196 branches throughout Shanghai and 4,500 employees serving a customer base of local small and medium-sized businesses.
Earlier, the Shanghai-based Bank of Communications, the nation's largest shareholding commercial bank, said it was planning to sell 15 percent of its assets to two or three foreign financial giants to strengthen its position in the market.
(China Daily December 31, 2001)
