ICBC to sign deal with Goldman Sachs
(AP)
Updated: 2006-01-27 13:48

China's biggest bank, state-owned Industrial and Commercial Bank of China, is set to sign a long anticipated "investment deal" on Friday with Goldman Sachs Inc. and other foreign investors, a bank official said.

A spokesman in the Beijing-based bank's news department confirmed reports that the deal was to be signed Friday. However the official, who gave only his surname, Xie, said he could not give any details.

The bank, known as ICBC, had earlier announced that investors including Goldman Sachs Group Inc., American Express Co. and Allianz AG of Germany planned to buy a combined 10 percent stake for more than US$3 billion (euro2.5 billion).

The Wall Street Journal reported Friday that ICBC had agreed to sell the stake as planned, for US$3.78 billion (euro3 billion) , with Goldman Sachs and its private equity funds investing US$2.58 billion (euro2.11 billion) for about 7 percent of the bank. Allianz would pay US$1 billion (euro820 billion) for a 2.5 percent stake and American Express would invest US$200 million (euro163 million), the report said, citing unnamed sources.

Instead of signing a joint agreement as a consortium, as earlier expected, each investor was set to sign a separate agreement with the bank in a ceremony Friday afternoon in Beijing, the reports said.

According to reports in the Chinese media, a consortium led by Citigroup bid nearly US$3 billion for a majority stake in the struggling mid-sized lender, based in the southern province of Guangdong. But it faces competition from other contenders, including France's Societe Generale SA.

According to the Wall Street Journal, Citigroup's offer would net it a stake of between 40 percent and 45 percent, with U.S. private equity firm Carlyle Group taking a 10 percent stake.

China usually limits investments by a single foreign institution in a state-run bank to less than 20 percent, with total foreign investment capped at 25 percent.

But the Guangzhou-based bank reportedly is being allowed to sell off a larger share of its equity than usual because of its urgent need for capital and its large burden of bad loans.

Chinese regulators are encouraging foreign banks to take strategic stakes in the industry, both as a source of funding and to upgrade local bank services with foreign managerial and technical expertise as the industry prepares for the opening of local financial markets to full foreign competition late this year.

Like other major Chinese banks, ICBC is in the midst of a restructuring and preparing to sell its stock on the Hong Kong exchange, possibly later this year, aiming to boost its competitiveness.

ICBC recently announced the founding of a US$248 billion yuan (US$30.6 billion; euro25 billion) joint-stock company, equally owned by the Ministry of Finance and the government-owned Central Huijin Investment Co. In April, the government injected US$15 billion into the bank to help replenish its funds.