IFC raises Philippines stake, may invest in China, Korea

IFC raises Philippines stake, may invest in China, Korea

WASHINGTON (Bloomberg): The International Finance Corp., the
private lending unit of the World Bank, has raised its stake in a
Philippines bank and may invest in banks in China and Korea,
bolstering its presence in Asia's cash-strapped financial
industry.

The IFC raised its stake in Far East Bank & Trust Co., the
seventh-largest bank in the Philippines, to 3 percent from 2
percent, and also plans to invest as much as $50 million in
Kookmin Bank of South Korea, Javed Hamid, director of East Asia
and the Pacific at the IFC, said on Tuesday.

In China, the IFC expects approval from regulators before June
to invest as much as about $20 million each in Minsheng Bank and
Bank of Shanghai, among the nation's smallest banks. The move
would pave the way for greater foreign ownership in the country's
financial industry.

"The Chinese authorities want to deregulate the financial
sector, but they want to move cautiously," Hamid told Bloomberg.
"They have asked us -- encouraged us -- to look at investment
possibilities, and that would be like an experiment to see how it
works."

The negotiations are taking place just as the outlook for
Chinese banks worsens. Standard & Poor's Corp., warned this month
that it may cut the ratings of five of China's largest banks
because of an increase in non-performing loans, which will crimp
profits.

China was the largest destination for IFC investment in the
year ended June 30, with companies such as Chengdu Chemical Co.
and Shanghai Krupp Stainless Steel Co., receiving loans, equity
and project financing of about $580 million. China was the World
Bank's biggest borrower between 1992 and 1997.

Even so, the IFC isn't writing a blank check for Minsheng and
Bank of Shanghai, Hamid said.

In the Philippines, the IFC bought about $5 million of Far
East Bank's shares, which are traded the Philippine Stock
Exchange, Hamid said. It's the latest international lender to
invest in the Southeast Asian nation in the last three months,
including a $280 million loan from the International Monetary
Fund and $600 million from the World Bank for three projects.

In Korea, the IFC plans to invest in Kookmin as part of a
group of investors, Hamid said. Like many of the nation's banks,
it needs new funds to stay afloat after ballooning bad debts
eroded its capital. The bank said last month it will offer more
than $500 million of new stock and use proceeds to crank up
lending.