World’s No.1 bank by market cap, ICBC, rallies on Goldman Sachs pledge to remain invested
26 Mar 2009
Industrial & Commercial Bank of China Ltd. jumped the most in five months in Hong Kong trading after shareholder Goldman Sachs Group Inc. agreed to keep most of its stake for at least another year.
ICBC, the world's most profitable bank, rose 15 per cent, erasing losses since 31 December, as Goldman Sachs's pledge to keep 80 per cent of its almost 16.5 billion shares eased concern about added supply of stock. Before today, ICBC had fallen 12 per cent in Hong Kong this year, the worst performance among six Chinese banks traded in the city, on speculation Goldman would sell its $8.7 billion holding.
ICBC announced an agreement with Goldman Sachs Group Inc. that paves the way for a possible sale by the US bank of part of its 4.9 per cent stake in the Chinese lender, a holding currently worth about $7.6 billion. While Goldman Wednesday committed to keeping 80 per cent of its investment in government-controlled ICBC until April 2010 under the new arrangement, it will be free to sell the remaining 20 per cent after 28 April.
In recent months, a number of foreign banks have sold stakes in Chinese banks to raise much-needed cash amid the global financial crisis. The banks include Bank of America Corp., which sold part of its stake in China Construction Bank Corp., and Royal Bank of Scotland Group PLC and UBS AG, which both sold their entire stakes in Bank of China Ltd.
Foreign executives have indicated that the motive for the stake sales has less to do with a lack of confidence in the Chinese banks than the need to shore up capital at home. Still, such sales are a sensitive issue in China, where many people have criticized the foreign investment deals in those banks, saying the stakes were sold at too low a price.
ICBC shares closed at HK$4.11 at 4 p.m. local time, the highest since 6 January. Bank of China Ltd., the nation's third- largest by market value, rose 7.9 per cent. China Construction Bank Corp., the second largest, added 7.5 per cent.
Yesterday's stock market rally lifted the bank's market value by about $14 billion, almost equivalent to the capitalization of Citigroup Inc. At $191 billion, ICBC's value is more than $80 billion bigger than that of JPMorgan Chase & Co., the largest non-Chinese bank by market capitalisation.
Separately, American Express Co., which owns 1.28 billion shares or 0.38 per cent of ICBC, said it is considering selling its shares when the lockups on its shares expire in April and October. The two companies also reaffirmed their cooperative relationship, under which ICBC issues AmEx cards.
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