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BBVA to double stakes in CITIC

(Agencies)
Updated: 2008-06-04 11:47

Banco Bilbao Vizcaya Argentaria SA, Spain's second-biggest bank, will double its stakes in units of China's State-owned CITIC Group for 800 million euros ($1.24 billion) to increase revenue from the fastest growing major economy.

BBVA will raise its holding in China CITIC Bank Corp to 10.1 percent from 5 percent, the Bilbao-based bank said in a filing to regulators. The Spanish bank has an option to increase that to 15 percent within two years, it said. BBVA's holding in CITIC International Financial Holdings Ltd, also controlled by CITIC Group, is being boosted to about 30 percent from 15 percent.

China's economy has expanded by more than 10 percent for nine straight quarters, driving consumer and corporate demand for loans and other financial services. In contrast, economic growth is slowing in Spain, Mexico and the US, where BBVA gets 80 percent of its profit.

"It's good to see banks diversifying their business away from the slowing Spanish economy," said Marta Campello, an investment manager at Abante Asesores in Madrid. "This is going to be good news for the bank."

From CITIC International's point of view, the Spanish bank's increased investment is "positive," because the alliance adds products and clients, said Wong Kwok Wai, an analyst at BOC International Holdings Ltd.

BBVA will name three members to the board of CITIC International and two to China CITIC Bank, China's seventh-largest by assets, the Spanish company said. The units' parent, CITIC Group, is China's biggest State-owned investment company.

The increase in BBVA's holding in CITIC International will follow a decision on the Hong Kong company's possible sale.

BBVA bought its original stake in CITIC Bank prior to the Chinese company's initial share sale in April last year.

Other foreign banks seeking to benefit from Chinese growth have also taken stakes in local banks.