State media said Bank of China has made its first selection of strategic institutional investors to help with its initial public offering slated in the first half of 2005. According to a report in the 21st Century Business Herald, the list includes Citibank, JP Morgan Chase, China National Petroleum Corp and China Petroleum & Chemical Corp. Some mainland institutions are still under consideration, Herald said. Citibank and JP Morgan will reportedly be allowed to buy Bank of China shares using non-cash assets.

The Commonwealth Bank of Australia said it was in discussions over a possible 11% stake in the 64-branch Jinan City Commercial Bank, ranked 8th among China's 112 commercial banks. A deal would make it the first Australian player to enter China's bank sector. Regulators allow foreigners to hold up to 20% of a mainland bank and Commonwealth is reportedly leaving the option of taking a bigger stake open. Jinan City claims assets of just under RMB 20 billion.

China Construction Bank said it would this month complete pre-flotation reorganization efforts and convert from a standard government unit into a shareholding structure, enabling it to float a portion of its shares. The bank said the reorganization would be completed within its self-imposed September deadline. The move follows similar action by the Bank of China, which is also readying for its initial public offering, and illustrates the pressure state banks are under to get first-mover advantage in the competition to sell shares on domestic and overseas exchanges. One analyst said the state banks have to look like they are on the ball, not something they are famous for. Both CCB and BOC, once weighed under by massive NPLs, are shopping for strategic investors to get cash and give their management and image much needed sparkle. As soon as China's fifth largest bank, Bank of Communications, announced that HSBC would take a 20% stake, its credit outlook was adjusted upward.

Citic Securities, one of only two listed brokers on the mainland, said its board had approved a plan to begin negotiating merger with rival GF Securities, the seventh-largest brokerage in an industry ravaged by shrinking stock valuations and sales margins. Analysts quoted in media reports said that, unlike previous broker mergers, this one made sense and appeared internally driven, even though the plan looked like a precision fit with Beijing's drive to encourage industry consolidation. Although company officials declined to get into specifics, Shenyin & Wanguo Securities had earlier reported that Citic Securities would pay RMB 520 million (US$62.65 million) for a 20% stake.

ING Group is planning to acquire a stake in a mainland bank, according to the firm's chairman Michel Tilmant. ING officials said that the firm was considering all options seriously but declined to comment on reports that ING was in talks with Beijing City Commercial Bank. ING recently announced that it received regulatory approval to set up a branch of its life insurance JV with Beijing Capital Group.