The future ownership of the Guangdong Development Bank (GDB) is still undecided, but a decision is expected later this month, says a source close to the GDB restructuring committee made up of officials from China's central bank and the Guangdong city government.

 

The source described as "groundless" rumors that a group led by Citigroup had been given the nod by China's State Council to buy into the lender, beating the Societe Generale-led group.

 

"It is impossible to make a decision in half a month on such a significant bank restructuring case and the central government and the committee are still weighing meticulously the bid plans," said the source, adding the most recent bid was submitted on August 31.

 

The source also denied the rumor that Citigroup had upped its offer. He said the bid at the moment focused on conditions of contracts, on which Citigroup stated it would stick to its original intent and not alter its terms on the GDB's bad loans liabilities while Societe Generale accepted all the terms of the Chinese government, including taking over the lender's bad loans liabilities.

 

A source with Societe Generale said any news not confirmed by the central bank lacked credibility, while a source with Citigroup said the bid plan was still under discussion and the decision is unlikely made in a short term.

 

Societe Generale and Citigroup have been in an 18-month wrangle for control of GDB. The offer from Societe Generale and its partners, including Chinese petroleum giant Sinopec and top steelmaker Shanghai Baosteel Group Corp, was about US$3 billion, including US$600 million to US$650 million from Societe Generale.

 

The rival Citigroup side, including the country's largest life insurer China Life Group and the major electricity distributor State Grid Corp had offered slightly more than US$3 billion for an 85 percent stake in Guangdong Development Bank.

 

Government rules state that a single foreign bank must hold less than 20 percent of the shares in a Chinese bank, and total foreign ownership cannot exceed 25 percent.

 

Su Ning, vice governor of the People's Bank of China, said earlier that no decision had yet been taken on whether or not the 25 percent threshold for ownership of a Chinese bank by a foreign bank would be raised.

 

The deal has aroused speculation that the government might make an exception by allowing a foreign bank own more than 20 percent.

 

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(Xinhua News Agency September 15, 2006)