China CITIC Bank, the country's seventh-largest bank by assets, said it'll float its shares in Hong Kong early next year after Spanish banking group Banco Bilbao Vizcay Argentaria (BBVA) agreed on Wednesday to invest US$635 million to purchase a 5 percent stake in the bank.

 

"We plan to launch our initial public offering (IPO) in Hong Kong early next year and then go back to the Shanghai bourse," said Chen Xiaoxian, president of CITIC Bank. Chen hopes to raise at least US$2 billion from its IPO in Hong Kong. Citibank, HSBC, Lehman Brothers, CICC and CITIC Securities are underwriters for the listing.

 

"The amount of money that we raise will depend on the situation at the time (of the float), but I think we can raise at least US$2 billion judging by our current growth," Chen added.

 

CITIC Bank reported its listing plan to the State Council in May and had been looking for a strategic partner. Insiders said Japan's Mizuho Financial Group Inc, France's BNP Paribas and China Life Insurance were looking at buying in but Spanish bank BBVA finally won the campaign.

 

BBVA, a multinational financial services group that operates in 32 countries, announced an investment of 989 million euros (US$1.2 billion) on Wednesday. The money will go to over 5 percent of CITIC Bank at 501 million euros (US$634 million) and 15 percent of CITIC International Financial Holdings (CIFH) for 488 million euros (US$617 million). In return BBVA will have one director on CITIC Bank's board and two on CIFH's.

 

The deal is subject to government approval.

 

This is the biggest investment by a Spanish company on the Chinese mainland and in Hong Kong so far, showing BBVA's decision to explore the Asia market. The Spanish bank has an option to increase its stake in CITIC Bank to 9.9 percent.

 

The alliance between BBVA and CITIC covers the development of retail and corporate banking on the mainland and in Hong Kong which is one of the fastest growing markets in the world. The cooperation between BBVA and CIFH, CITIC Group's international arm, will focus on corporate and investment banking and treasury business across Asia.

 

By the end of September the Beijing-headquartered CITIC Bank saw total assets reach 689.52 billion yuan (US$87.3 billion). This is up 11.84 percent compared with the end of last year. The bank's non-performing loans and capital adequacy ratio, two key indicators for its financial status, hovers around 2.79 percent and 9.18 percent respectively. This is better than the industry average. Its pre-tax profit topped 5.7 billion yuan (US$722 million) which is an increase of 2 billion yuan (US$253 million) quarter-on-quarter.

 

(China Daily November 24, 2006)