Banking

Govt seeks buyers for Bank of Guangzhou

By Jun Luo, Sean Pasternak and Fabio Benedetti-Valentini (China Daily)
Updated: 2010-11-18 13:19

SHANGHAI - The government of China's southern city of Guangzhou is seeking to sell a 20 percent stake in Bank of Guangzhou to a foreign investor for as much as $850 million, a person with knowledge of the matter said.

Bank of Guangzhou, the city's seventh-largest lender, has allowed due diligence by potential buyers including Groupe BPCE, France's second-largest bank by branches, and Bank of Nova Scotia, Canada's third-largest lender.

Foreign investors have announced plans to inject more than $16 billion into Chinese lenders since the start of 2006 as the country's GDP more than doubled.

A 20 percent stake in Bank of Guangzhou may be valued at $650 million to $850 million.

The Guangzhou municipal government, which owns 93 percent of the company together with other State-owned entities, plans to sell more than 50 percent of its holding to foreign and domestic investors, according to the person.

Under Chinese rules, foreign investors can own a maximum 25 percent of a domestic bank, with the limit for a single overseas shareholder set at 19.99 percent.

The stake sale will boost revenue for the government of Guangzhou, playing host to the Asian Games that started on Friday.

The government also plans to sell about 30 percent of the bank to domestic investors, the person said. Guangzhou International Holdings Group, which owns 64 percent of the bank, said in a Sept 17 statement that it seeks to sell no more than 2.5 billion of the bank's shares.

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Bank of Guangzhou is valued at 22.2 billion yuan ($3.34 billion), based on the minimum price and 8.3 billion shares disclosed in its 2009 report. The lender was established in 1996 and has 82 branches focusing on retail, corporate and treasury business. It has more than 3.5 million retail customers.

Bank of Guangzhou has forecast profit will more than triple to 1.7 billion yuan this year from 508 million yuan in 2009, and net income may reach 2.2 billion yuan in 2011, the person said.

The bank's other shareholders include Guangzhou Guangyong State-owned Assets Management Co, which has a 26 percent stake, and Guangzhou Guangyong Trading Co, owning 1.89 percent.

Citigroup Inc and foreign and Chinese partners in 2006 signed a $3.1 billion agreement to take control of Guangzhou-based Guangdong Development Bank. The investing group beat Paris-based Societe Generale SA and China's Ping An Insurance (Group) Co in the 18-month race to buy 86 percent of Guangdong Development, with New York-based Citigroup owning 20 percent of the bank.

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