BEIJING -
Citigroup Inc's status as the largest shareholder
in the Shanghai Pudong
Development Bank Co, China's No 2 publicly traded
lender, may be trumped by the Shanghai
International Group Co, a state-owned investment
company.
Six of Pudong Bank's shareholders
plan to sell their entire stakes to Shanghai
International, pending regulatory approval, the
lender said in a statement January 4. That would
give the Shanghai
government-owned investment
company a 21.45% stake valued at 8.6 billion yuan
(US$1.06 billion).
Citigroup, the world's
biggest bank by market value, said last month it
was quadrupling its stake in the Pudong Bank to
19.99%, the maximum permitted under Chinese
regulations and at the time the largest of any
shareholder. The New York-based lender, which is
leading a bid of about $2.7 billion for 85% of the
Guangdong Development
Bank, has trailed rivals such as HSBC Holdings Plc
in China's $1.7 trillion household savings market.
"This move will ensure that a Shanghai
government-controlled company will control Pudong
Bank, rather than Citigroup," said Tang Chuan, a
Hong Kong-based analyst at the KGI Securities Co.
"Pudong Bank may not be its focus now, as the US
bank may control and have a louder voice in the
Guangdong Development Bank," he said. Shanghai
International previously owned a 4.73% stake in
the Pudong bank. The six shareholders, all
controlled by the Shanghai Government, that are
selling their stakes own a combined 16.72%, or
654.6 million shares, according to the lender's
third-quarter profit statements.
"This is
just a change of form, not of substance, as they
are all Shanghai government enterprises," said Li
Yamin, a Shanghai-based analyst at Shenyin Wanguo
Securities Co. "They may look like they are
separate entities, but they flow back to the same
source. It doesn't matter whether Citigroup is the
biggest shareholder, because in actuality it never
was the biggest shareholder."
The sellers'
combined stake is valued at nearly 6.7 billion
yuan ($830 million), based on the stock's closing
price of 10.25 yuan ($1.27) on January 4. The
Shanghai Industrial Development Co, the city
government's investment arm, said in a statement
that it plans to sell its entire 1.57% stake in
the Pudong Development Bank Co for 338.3 million
yuan ($41.77 million). Shenergy Co, the Shanghai
State-owned Assets Operation Co, Orient
International (Holdings) Co, Shanghai Guoxin
Investment Development Co and the Shanghai Jiushi
Corporation are the other sellers, according to
the statement.
In return for the US bank's
investment last month, the Pudong Bank, which has
335 branches nationwide, allowed Citigroup to
invest in another Chinese bank. In 2003, when it
bought a 4.6% stake in the Shanghai lender,
Citigroup agreed not to buy into any other Chinese
banks.
"It's too early to say what impact
this will have on the operations of the bank,"
Shen Si, a Shanghai-based vice-president of Pudong
bank, said. "We received notice that six
shareholders have signed agreements to sell their
stakes to the Shanghai International Group, but
there are no details of the size of the stakes
they plan to sell and the value."
Citigroup's Hong Kong-based spokesman
Richard Tesvich declined to comment. The US bank
is bidding for Guangdong Development against
groups led by France's Societe Generale and Ping
An Insurance (Group) Co, China's second-largest
insurer, according to sources familiar with the
plan. Citigroup, one of three bidders, is offering
to buy less than 50%, the sources said.
