A chinese coup
Below is a MRR and PLR article in category Finance -> subcategory Other.
A Chinese Coup
Title:
A Breakthrough in Chinese Banking
Summary:
In a bold move, Citigroup is set to become the first foreign bank to gain control of a Chinese lender, positioning itself ahead of its competitors.
Article Body:
Citigroup is challenging the norms of foreign ownership in Chinese banks. The financial giant is leading a consortium with a bid of roughly 24 billion yuan ($3 billion) for an 85% stake in Guangdong Development Bank (GDB), marking the first time a foreign bank could hold such control. Citigroup could secure a 40-45% share, circumventing the typical 20% cap for individual foreign investors and 25% for all foreigners combined.
This move marks a comeback for Citigroup, which has watched competitors secure positions in the Chinese market. In 2005, Bank of America (BofA) acquired a 9% stake in China Construction Bank (CCB), one of the top four Chinese lenders, leaving Citigroup sidelined. This time, Citigroup has outbid other major players like ABN Amro and Société Générale for GDB. While Newbridge Capital was the first foreign investor to gain control of a Chinese bank, their focus, Shenzhen Development Bank, is far smaller than GDB, which reported assets of 345 billion yuan at the end of 2004.
However, Citigroup is paying a steep price, at 2.3 times book value, compared to the 1.15 times BofA paid for its CCB stake. GDB's financial health is concerning, with liabilities surpassing assets by 35 billion yuan, propped up by state subsidies, with a capital-adequacy ratio below international norms and limited profitability.
To move forward with the GDB deal, Citigroup must also restructure another investment. In 2003, Citigroup purchased 4.6% of Shanghai Pudong Development Bank, a relationship insiders describe as challenging. Permission was granted for another mainland investment only if Citigroup increased its stake in the Shanghai bank to 19.9% for an alleged $800 million, four times the original share price. Additionally, Citigroup had to agree not to form a joint venture with GDB in the lucrative credit card sector, where GDB excels.
Despite these hurdles, Citigroup's competitors may still feel hard done by. By last year, 22 foreign banks invested $16.5 billion in 17 Chinese lenders with minimal influence. Chinese regulators might argue GDB's condition warrants this exception. Liu Mingkang, the banking regulator, warned that foreign dominance of a Chinese bank would classify it as foreign, limiting its operations in China. Yet, he may now face pressure to ease these restrictions, potentially benefiting firms like HSBC, which holds 19.9% of BoCom, a more stable bank than GDB.
In an unexpected twist, Citigroup's bold move might end up opening doors for its rivals to gain greater control.
---
Explore More:
- Find free ebooks: [ebooks-lib.com](http://www.ebooks-lib.com)
- Romantic tips: [iloveher.info](http://www.iloveher.info/love/love.php)
- Movies online: [d2pgroup.com](http://www.d2pgroup.com)
You can find the original non-AI version of this article here: A chinese coup.
You can browse and read all the articles for free. If you want to use them and get PLR and MRR rights, you need to buy the pack. Learn more about this pack of over 100 000 MRR and PLR articles.