Citigroup deal reported for China bank
Citigroup Inc. plans to sign an agreement today to take control of China’s Guangdong Development Bank for about $3 billion, two people with knowledge of the decision said.
Citigroup beat Paris-based Societe Generale and China’s Ping An Insurance (Group) Co. in the 16-month race to acquire 85% of Guangdong Development, said the people, who declined to be identified before the announcement. New York-based Citigroup will purchase 20% of the company, based in Guangdong province bordering Hong Kong.
The deal will give Citigroup and partners such as IBM Corp. and China Life Insurance Co. access to 500 banking outlets in a market where annual loan growth averaged 14.5% from 2000 to 2005. London-based HSBC Holdings and Bank of America Corp. of Charlotte, N.C., are among overseas firms that spent more than $17 billion in the last two years to buy stakes in Chinese banks.
“GDB is a pretty major bank and it’s close to Hong Kong,” said Jim Antos, an analyst at Bear Stearns Asia Ltd. “For Citibank and any foreign bank that has a presence in Hong Kong, that’s a very good location. You could leverage off the two economies.”
Those opportunities are a bigger draw than the bank itself, which is saddled with bad loans, Antos said. Bad loans accounted for 21.9% of total lending at the end of 2003, the latest figure from the company.
