DBS, Deutsche Bank to buy GDB

DBS, Deutsche Bank to buy GDB

Agence France-Press, Beijing

Singapore's DBS and Germany's Deutsche Bank are to buy 10 billion shares in Guangdong Development Bank (GDB) for 17.7 billion yuan (US$2.18 billion), state media reported on Thursday.

The purchase, however, will not give them a controlling stake, the China Daily said citing the Guangdong bank's management.

Earlier media reports said China planned to sell a majority stake in GDB, which would have made it the first state-owned mainland bank owned by foreigners.

The China Daily said the percentage of shares the two banks will buy and their respective offers were not known, but it was unlikely GDB would offload a 51 percent stake to a foreign investor.

Industry watchdog, the China Banking Regulatory Commission, has not relaxed its policy on the limit for shares held by foreign investors.

In 2003, the commission raised the limit from 15 percent to 20 percent for the stake a single foreign investor can hold in a domestic bank. It increased the limit further to 25 percent for all foreign shareholders.

"Even though the commission changed the ratio limit, GDB is not likely to be chosen as a pilot bank due to its close relation with Guangdong provincial government," said the newspaper.

According to China Business News, the Guangdong government plans to inject 20 billion yuan ($2.47 billion) into GDB to strengthen its controlling stake.

The People's Bank of China, the central bank, also intends to reloan 10-20 billion yuan to the Guangdong bank, which plans to list within two years.

GDB had 215.7 billion yuan in outstanding loans and 344.5 billion yuan in assets at the end of 2004, according to the bank's website.

Several foreign banks have bought into Chinese banks including Bank of America Corp, the third-biggest U.S. banking group, and Britain's HSBC Holdings Plc, Europe's largest bank.

The government is keen to ensure the banks attract funds and make them more competitive before the financial sector opens the same lending services to foreign competition at the end of 2006.