China Banking Regulatory Commission Chairman Liu Mingkang ordered the Bank of China and China Construction Bank, both the subject of ongoing corruption investigations, to produce solid results in their bids to sell stakes to foreign investors prior to their IPOs, while warning their restructurings would be closely monitored.
The weightiest call of urgency, however, came from none other than Chinese President Hu Jintao who, according to state media, urged faster restructuring in the banking sector at an April meeting of Communist Party Politburo Standing Committee members to discuss the direction of key state sectors.
Hu's endorsement lends support to party members arguing for state banks to seek overseas IPOs quickly as a means to stem corruption. The opposing camp, who says the banks aren't ready, given their weak internal controls and management, saw evidence to support their position in the reported delay of BOC's IPO.
BOC's US$3-4bn Hong Kong listing is now "unlikely" to occur this year, the Financial Times reported, citing incomplete restructuring and no foreign partner.
Meanwhile, the country's largest bank, the Industrial and Commercial Bank of China, will get a US$15bn bailout, an amount well under the US$22.5bn given two other stateowned lenders, the BOC and CCB, state media reported, without citing reasons for the disparity. ICBC, which was in worse shape than the other two banks, is widely believed to need as much as US$50bn for its bailout.
While Beijing looks to foreign banks to lend their expertise to help modernize China's banks, it appears skeptical that their increasing stakes in Chinese banks aren't just a portfolio padding exercise. In response to the rash of stake-buying by foreign banks across the country, CBRC Vice-Chairman Shi Jiliang hinted that China could limit their equity stakes to just two Mainland lenders, according to a report in China Business News.
But still, the acquisitions rage on ahead of China's full market opening at the end of 2006, and now with a new twist – foreign banks are looking to invest in smaller lenders in a bid for greater management control. Commonwealth Bank of Australia, that country's largest retail lender, recently purchased a 19.9% stake in Hangzhou City Commercial Bank for US$78m, adding to its 11% stake in Jinan City Commercial Bank for US$17m.
France's BNP Paribas has been scouting local lenders lately, saying it is "talking with a few" city and regional banks that it declined to identify. BNP has reportedly held talks with the Suzhou City Commercial Bank in Jiangsu province and Ningbo City Commercial Bank in Zhejiang province.
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