Money Matters, Simplified.
Citic Bank to acquire stake in CIFH
Beijing, May 11: In an endeavor to branch out outside the mainland, China Citic Bank Co (SEHK: 0998; SSE: 601998) will pay parent China Citic Group HK$13.6 billion or U.S$1.8 billion to be in command of a Hong Kong banking affiliate.
The deal
Under the cash deal, Citic Bank, China’s sixth-largest lender by market value, will purchase 70.32 percent of Citic International Financial Holdings Ltd. (CIFH) (SEHK: 0183). Spanish Banco Bilbao Vizcaya Argentaria (NYSE: BBV, BMAD: BBVA, BVPASA: BBV) owns the rest of Citic International.
In a filing made to the Hong Kong stock exchange, Beijing-based Citic Bank said that the acquisition is subject to the shareholders’ approval at a meeting in Beijing on June 29. The deal is expected to be completed by the end of this year.
Talking of the pros and cons of the deal, Warren Blight, an analyst at Fox-Pit Kelton in Hong Kong, said, “It’s a good use of excess capital for Citic Bank. The negative aspect would be that there’s some dilution of the China appeal of Citic Bank.”
The strategy
By acquiring CIFH, Citic Bank is essentially looking at controlling Citic Ka Wah Bank Ltd, a wholly-owned subsidiary of CIFH. Having its registered office at 232 Des Voeux Road Central, Hong Kong, Citic Ka Wah Bank has 27 branches in Hong Kong and one in Macau.
Citic Bank, through CIFH, will also get control of Hong Kong based Citic International Asset Management Ltd (CIFH stake 40 percent) and Citic Capital Holdings Ltd (CIFH stake 50 percent).
Thus CIFH would give Citic Bank a strong foothold in Hong Kong. Chairman of Citic Bank, Kong Dan, said that the bank intended to make use of the cross-border services platform of CIFH. This platform will help extend its branch network from the mainland to international financial centers.
About Citic Bank
China Citic Bank is a wholly-owned subsidiary of China International Trust and Investment Corporation (CITIC). Established in February 1987 and formerly known as CITIC Industrial Bank, this internationally oriented commercial bank has more than 13,000 employees on its payroll.