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CCB to tread carefully on acquisitions

By Yang Zhen (China Daily)
Updated: 2009-03-18 07:52

China Construction Bank (CCB), the country's second largest lender by market value, will tread cautiously on overseas acquisitions this year, Guo Shuqing, chairman, CCB told China Daily.

"The global financial crisis is far from over and a lot of things are still uncertain. We will not make hasty decisions on overseas acquisitions under such circumstances," Guo said.

Related readings:  CCB to give out 500-600b yuan in loans  CCB approved to buy 67% stake in Xingtai Trust  CCB floats $4.4b subordinated bonds  Non-financial acquisitions may increase this year

The value of numerous global banks has declined sharply due to the financial crisis. For instance, Citigroup shares have fallen by more than 94 percent from its 52-week high of $27.35 in April 2008.

Domestic operations would constitute CCB's core business, Guo said. But prudence on overseas acquisitions will not stop CCB from expanding its presence in the global market, he said.

CCB's New York branch has received a license from the New York State Banking Department on Feb 18 and its London branch is also expected to win a license from local authorities later this year, Guo said.

The bank is also a major player in the central government's 4-trillion-yuan economic stimulus plan.

"CCB holds an advantage because of its experience in handling loans for infrastructure projects and property development. It is possible for CCB to be the lead bank in the government's 4-trillion-yuan package," Guo said.

The lender extended new loans worth 255.6 billion yuan in January alone, after issuing over 200 billion yuan in new loans in the last two months of 2008. About half of the new loans went to fund infrastructure projects, a CCB statement said.

Bill financing, an act by which the legal holder of a commercial bill transfers it to the bank to acquire cash before its maturity date, only accounted for 14 percent of CCB's new loans.

Guo said he was optimistic that CCB's return on equity (ROE) ratio of 24.91 percent and non-performance loan (NPL) ratio of 2.71 percent would enthuse investors and help stabilize the price of its shares.

"We understand that Bank of America (BofA)'s decision to sell its stake in CCB resulted from its financial difficulties. BofA has said many times that it will continue to be a strategic partner of CCB in future," Guo said.

In January, BofA sold 5.62 billion Hong Kong-listed shares of CCB, valued at about HK$22 billion, or HK$3.92 apiece, compared to its purchase price of HK$1.32 for every CCB share.

BofA still holds a 16.7 percent stake in CCB. But the American bank can only sell 5.78 percent of that stake, as the lock-in period for the balance won't expire before August 2011.

Earlier, Sinocast Daily Business quoted a spokesman from the US bank as saying that BofA may further decease its stake in CCB.

CCB shares closed 1.19 percent higher yesterday, at HK$ 4.25, a day after one of its shareholders reportedly raised $52 million by selling 100 million of the lender's shares.

The seller sold these shares at HK$4.05 each, a person familiar with the deal said. The source said that BofA was not the seller, but did not elaborate on who actually sold the shares.

In addition, CCB raised 30 billion yuan by selling subordinated bonds between Feb 24 and March 2. It may float another 10 billion yuan of bonds if required.