ICBC's Jiang Says Offer to Standard Bank Is `Very Reasonable'
Industrial & Commercial Bank of China Ltd. Chairman Jiang Jianqing said he's confident Standard Bank Group Ltd. shareholders will approve a $5.6 billion investment in Africa's biggest bank, and ruled out raising the price.
Investors in South Africa's Standard Bank will vote later today on selling a 20 percent stake to ICBC, the world's largest bank by market value, for an average 120.29 rand ($17.66) in cash per share. Jiang, 54, said he traveled to South Africa last month to shore up support for the deal.
``The price we paid is based on a very reasonable valuation, and ICBC will bring a lot of synergies to Standard Bank,'' Jiang said in a Nov. 29 interview in Beijing. ``I'm very confident about the success of this investment because I've received very positive feedback from investors.''
ICBC, armed with enough cash to buy JPMorgan Chase & Co., has announced acquisitions in Indonesia, South Africa and Macau in the past year, and also is buying a stake in a Thai Bank. Jiang said he'll continue to focus on emerging markets, where ICBC has spent $6.4 billion making investments and adding branches since Jan. 1, adding that he'll be ``tightfisted'' in negotiating purchases.
The Standard Bank deal, announced in October, is the biggest overseas investment by a Chinese company and the largest foreign investment in South Africa since apartheid ended in 1994.
Public Investment Corp., Standard Bank's biggest investor, supports the transaction, the fund's Chief Executive Officer Brian Molefe said Nov. 27. PIC holds 14 percent of Standard Bank, which closed at 105 rand on Nov. 30.
Henry Hall, Citigroup Inc.'s South Africa banking analyst, said Oct. 30 that shareholders should vote against the deal because the price is too low.
Standard Bank, based in Johannesburg, has offices in 18 African countries and 21 other nations. Jiang said he isn't planning any additional acquisitions in Africa, relying instead on joint ventures with Standard Bank. ICBC and Standard Bank will take equal stakes in a $1 billion global mining fund to invest in natural resource projects.
Jiang said ICBC, with $136 billion in cash and near-cash securities as of Sept. 30, won't overspend on acquisitions. He said an ``ideal'' investment would be in a ``healthy,'' high- growth market with close trade and economic ties to China, and where ICBC's corporate customers already have operations.
``Emerging markets are the priority in ICBC's overseas expansion strategy,'' Jiang said. ``We will be very tightfisted and spend every penny of ICBC carefully.''
Banks in emerging markets increased earnings per share by an average 22.6 percent from 2001 to 2006, almost double the global average, analysts at UBS AG estimated in July. Growth may accelerate to 27.8 percent this year, they said.
ICBC ``wants exposure to other high-growth markets, such as South Africa and Southeast Asia,'' said Yu Kei Lee, an analyst at Core Pacific-Yamaichi International Ltd. in Hong Kong. ``It would find more synergy making investments in banks similar to itself.''
ICBC's strategy underscores a shift in the balance of power between Chinese banks -- who raised $63 billion selling stock in the past two years -- and their rivals elsewhere, who've announced more than $60 billion of writedowns and trading losses linked to the collapse of the subprime mortgage market.
The Chinese bank wrote off about $58 million of investments in mortgage-backed securities in the third quarter. That's less than 1 percent of the $7.9 billion writedown that led to the ouster of Merrill Lynch & Co. Chief Executive Officer Stan O'Neal.
Three of Five
China is home to three of the world's five largest banks by market value. At $339 billion, ICBC is now worth more than twice as much as Citigroup, which plunged 42 percent this year in New York. The Chinese bank's cash hoard, fattened by the $22 billion raised from last year's initial public offering, is three times that of Citigroup, the largest U.S. bank by assets.
Jiang's overseas push began last December with the purchase of a 90 percent stake in PT Bank Halim Indonesia for 90 billion rupiah ($10 million). On Aug. 29, ICBC agreed to buy 79.9 percent of Macau's third-biggest bank from billionaire Stanley Ho's Sociedade de Turismo e Diversoes de Macao for almost 4.7 billion patacas ($584 million).
ICBC opened a Russian division last month with $40 million of registered capital. ICBC is also buying 19.3 percent of Thailand's ACL Bank Plc from Bangkok Bank Pcl, the country's biggest lender.