Customers at a branch of Standard Bank in Rosebank, Johannesburg, South Africa. Industrial & Commercial Bank of China Ltd has a 20 percent stake in South Africa's biggest bank by assets. [Photo / Bloomberg]

The Chinese lender will pay $600 million for 80 percent shareholding

BEIJING - Industrial & Commercial Bank of China Ltd (ICBC), the world's biggest lender by market value, announced its biggest takeover in nearly four years on Friday. The bank will buy an 80 percent stake in the Argentine division of South Africa's Standard Bank Group Ltd.

ICBC will pay $600 million for the stake in Standard Bank Argentina SA (SBA), Standard Investments SA and Inversora Diagonal SA, according to a statement from the lender.

SBA is Argentina's 12th biggest bank by assets. It has a full license, including retail banking, corporate banking, investment banking and other business.

After the transaction is completed, ICBC and Standard Bank London Holdings Plc plan to invest $100 million jointly in SBA.

"The acquisition is a win-win choice for all parties. It will help ICBC obtain a commercial banking license in Argentina and become the first Chinese financial institution to enter the local market, which is very important to ICBC's global strategy," said Jiang Jianqing, chairman of ICBC.

South America is a region that is an important component in the bank's globalization strategy, and Argentina is one of the key focused markets for the bank, with strong radiation to the whole South American region, said ICBC in a news release.

"If successfully completed, the transaction will strengthen ICBC's business network across Latin America and enhance our operating capability in the Americas," said Jiang.

ICBC has a 20 percent stake in Standard Bank, Africa's top bank by assets, which increased its presence in Argentina in 2007 by acquiring the local operations of Bank Boston Corp.

"With China being Argentina's second-largest trading partner, the proposed transaction will provide ICBC with an entry point into Argentina as the first Chinese bank to operate there," said Jacko Maree, the chief executive of Standard Bank Group.

"It (SBA) is currently our only universal banking operation outside the African continent. The proposed transaction presents an opportunity to realize value from the group's successful investment in Argentina. It also offers us the opportunity to continue to develop our partnership with ICBC and to help connect Argentina to Africa and other selected emerging markets, including Brazil and China," said Maree.

Compared with other Chinese banks, ICBC has been aggressive in promoting its overseas presence through acquisitions in the Americas.

Six months ago, ICBC acquired 80 percent of Bank of East Asia Ltd's US business for $140 million.

Its assets on the American continent surged 5.5 times to $6.59 billion at the end of 2010 from $1.01 billion a year earlier, according to ICBC's annual report.

The bank aims to draw 10 percent of its assets and profits from overseas operations by 2016, up from 4 percent now, mainly by exploring emerging countries, according to Jiang as quoted by Reuters. It plans to increase its global footprint by setting up new branches in countries such as Brazil, India and Pakistan.

ICBC has also opened five branches in Europe this year, and has applied to open new branches in Peru and Brazil.

China's tightened control over new credit this year contributed to banks' greater willingness to explore overseas markets, and the lower value of some foreign assets after the global financial crisis provided good acquisition opportunities, said Guo Tianyong, director of the Research Center of the Chinese Banking Industry at the Central University of Finance and Economics.

"In addition, increasing attempts by Chinese enterprises to explore overseas markets in the wake of the crisis also makes the globalization of Chinese banks a natural choice."

The deal in Argentina is subject to regulatory approval and is expected to be completed in the first half of 2012, said Standard Bank.

Juan Paz, Argentina's economic and commercial counsellor to China, said there are currently a number of Chinese banks indirectly tapping into the Argentine market.

"We hope to see more and more Chinese banks investing and operating directly in Argentina's market in the future," said Paz.

ICBC's price in Shanghai's A-share market dropped by 1.2 percent to close at 4.11 yuan a share on Friday, against a backdrop of sliding prices among all the banks listed in the A-share market.