By Zhang Ran (China Daily)
Updated: 2007-10-26 08:59

The Industrial and Commercial Bank of China (ICBC) will spend US$5.46 billion to take a 20 percent stake in Standard Bank Group Ltd, Africa's largest bank, top officials of the Chinese lender said yesterday.

The deal is the biggest overseas investment by a Chinese company so far. It will make the ICBC the largest shareholder of the South Africa-based bank.

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The ICBC will pay an average 120.29 rand (135.232 yuan) in cash per common share, 8.4 percent more than Standard Bank's closing price, it said in a statement. Standard Bank shares jumped 5.9 percent in Johannesburg on news of the deal.

The ICBC will take 10 percent of the new shares issued by Standard Bank, and another 10 percent will be bought from other shareholders, Jiang Jianqing, chairman of the bank, said. Jiang said the company has no intention to buy more currently.

The deal is the Chinese lender's third overseas investment in less than a year and the first in Africa. The ICBC reached an agreement to buy 79.9 percent of Macao's third biggest bank for US$586 million on August 29. It also purchased a 90 percent stake in PT Bank Halim Indonesia for US$10 million in December 2006.

The bank aims to increase its overseas investment to 10 percent eventually from the current 3 percent, Jiang said, adding that it will focus on investment in the emerging markets.

"We believe Standard Bank is an ideal partner for us," Jiang said. "On the one hand, trade between the two countries is booming, which will bring greater business for us, and on the other, the bank itself is a market leader in Africa and will bring us financial benefits."

Trade between China and the African continent swelled 40 percent last year to US$55.5 billion, making China Africa's third largest trading partner.

Standard Bank has 951 branches in 18 African countries and over 100 units outside the continent. Over half of the bank's profits come from non-interest income as a result of diversified businesses, which Jiang believes will help the Chinese lender in expanding a comprehensive business besides retail banking.

Following the stake purchase, the ICBC will have the right to nominate two members to Standard Bank's board, with one of them becoming vice-chairman.

Profit of the ICBC jumped 76 percent in the third quarter from a year earlier, driven by higher fee income and rising loans. Net fee income surged 136 percent to 9.4 billion yuan, driven by mutual fund distribution, custodian services and credit cards, the bank said.

"The expected macroeconomic tightening policies will not affect the bank's growth," said Yang Kaisheng, president of the bank.