Citigroup and allies bag China bank deal for $3.1 billion

Mumbai:  A US banking conglomerate became the first overseas financial-services company to manage a Chinese bank after it signed a $3.1 billion agreement to take control of state-owned Guangdong Development Bank.

Citigroup, the biggest US bank, and its partners, including International Business Machines Corporation (IBM) and China Life Insurance Company, will gain access to 500 banking outlets in a market where annual loan growth averaged 14.5 per cent from 2000 to 2005. New York-based Citigroup will own 20 per cent stake in the Chinese bank, valued about $720 million.

Citigroup and its allies beat Paris-based Societe Generale SA and China's Ping An Insurance (Group) Company in the race to buy 86 per cent of Guangdong Development Bank.

London-based HSBC Holdings Plc and Bank of America Corp. of Charlotte, North Carolina, are among overseas firms that have spent more than $17 billion in the past two years to buy stakes in Chinese banks.

Though the bank is saddled with bad loans the opportunities, it offers are a bigger draw. Bad loans accounted for 21.9 per cent of total lending at the end of 2003, the latest figure from the company.

Guangdong Development will receive about 60 billion yuan ($7.6 billion) from the sale of non-performing loans and after the provincial government sells water and electricity assets, sources said.