And so it rolls on. Who would have thought that a mid-size bank teetering on the brink of insolvency could cause such a fuss?
The case of Guangdong Development Bank (GDB) is evidence of two things: a) the appetite Western banks have for establishing a significant foothold in China’s financial sector; and b) just how bad a cut of meat these bankers are willing to chase.
When it moved in for an individual 40% slice of GDB at the head of a consortium seeking 85% of the troubled lender, Citigroup was clearly hoping that GDB’s desperate need would trump the regulator’s 20% limit on foreign investment in China’s banks.
Rival bidder Société Générale cried foul play, Beijing shyed away from setting a precedent, and both groups were asked to re-submit bids.
Now what we appear to be seeing is something akin to a bottomless-pockets football game as both sides – now happy to settle for 20% of GDB as part of consortiums chasing an 80%+ stake – seek to fill their bench with the biggest and most Beijing-friendly talent.
Batting for Citigroup… China Life has been brought in as the big hitter with China Energy Investment Corp and telecom equipment maker China Potevio in support. Carlyle Group, while undoubtely a bulge bracket presence, may yet prove a poor selection if it shows its glass jaw in separate negotiations for a takeover of construction equipment manufacturer Xugong.
In the dug-out for Société Générale… Baoshan Iron and Steel and Sinopec – heavy industry stalwarts expected to produce heavyweight performances.
And to the winner… the chance to meet the tab on a bad lending legacy that stems back more than 15 years when Guangdong found itself awash with cash but had yet to impose rules on how to control it.