October 05, 2005
BNP Paribas Guards its Treasure
BNP ExCo member Alain Papiasse spoke to the SCMP yesterday in Hong Kong, disclaiming any desire on the part of the banking group to follow in the footsteps of RBS, HSBC, or BofA in plunking down large sums of cash on the mainland:
"The only thing that the group is not comfortable with is spending billions to invest in a small stake of anything," said Mr Papiasse. "If we are not in control, then we prefer a moderate investment."
He said there were now two types of foreign banks looking for opportunities on the mainland.
"The first type would try to invest a lot of money for a very small stake in a large national bank, while the second type would rather invest a small amount in a small regional bank. We definitely belong to the second group."
BNP further disclosed its interest in online (retail) broking in both China and India, and said that a China bank deal (thought as we have previously highlighted to be Nanjing City Commercial Bank) could be announced "within weeks."
September 28, 2005
Taureaux dans un magasin de porcelaine, redux
Even as Credit Suisse was dropping out as an investor in CCB, arch-rival UBS was concluding a $500m investment in Bank of China, alongside larger investors RBS (with co-consortium investors Merrill Lynch and Li Ka-Shing) and Temasek. UBS is said to have a "strategic arrangement" with BOC in the areas of investment banking and securities, presumably one different from the "exclusive strategic partnership" it has with RBS and general "collaboration" and "cooperation" which comes along with Temasek's also-"strategic" investment.
UBS also today announced plans to purchase 20% of of Beijing Securities for approximately $210 million, investing alongside the IFC.
Meanwhile, having been cut out by Deutsche in its bid for a stake in Huaxia Bank, BNP confirms that it is close to an investment in Nanjing City Commercial Bank, said to be in the $100m range. This investment would give the multi-national (but yet very French) banking group an 18.5% stake in the Chinese institution, which The Banker calls "a relatively well-run commercial lender" with low NPLs.
CS pulls out of CCB Investment, Stays in Underwriting Syndicate
China Construction Bank has begun pre-marketing with a full complement of underwriters - but without a planned $500m investment by Credit Suisse. A tip 'o the hat to our friends at FinanceAsia who scooped the story (even got credit from the Journal)
CCB's decision to drop CSFB's proposed investment was made last Thursday after it became clear the IPO would otherwise get delayed. This is because the only 'connected party' a bookrunner can technically allocate stock to is its own asset management arm unless it has received special regulatory approval.
CSFB, however, had been mandated late in the IPO process as a replacement for Citigroup, which had decided not to make a strategic investment in CCB and consequently been dropped as a bookrunner. As such, CSFB had not yet received special approval from the stock exchange by the time the IPO reached the final stages of listing committee approval and CCB did not want to wait around to get it.
At the same time, dropping CSFB was not really an option given its presence would mollify those members of Hong Kong's listing hearing committee who had been voicing concerns about the independence of fellow lead managers CICC and Morgan Stanley, both of whom have strong links to CCB.
As you may have read here previously, we think it somewhat odd that an underwriter who is being paid tens of millions of dollars could ever be considered "independent." Isn't that why the underwriters are not permitted to publish research during the blackout period? Who listens to brokers anyway?
What investors might find interesting is that, given a choice between being an investor and being an underwriter, CS would rather be an underwriter. What does that say about expected returns?
September 26, 2005
HSBC Is/is Not Looking at KEB, Which Is/is Not For Sale. Got it?
Reuters reports HSBC is looking at buying out Lone Star's 51% stake in KEB, a credible story as HSBC has long wanted to be in Korea and KEB is one of only a few possible banks left to buy. Kookmin is too strategic, Woori has cost the government too much money, Hana has other entangling alliances, and Shinhan will very probably do anything to avoid being acquired.
An HSBC official is quoted as saying:
"There will be an announcement on the merger talks soon," the executive was quoted as saying.
An HSBC spokeswoman in London declined to comment, while a Seoul-based spokeswoman for Lone Star told Reuters she had not heard of the talks with HSBC.
HSBC has been down this road before in Korea, most famously trying and failing to acquire Seoul Bank (now part of Hana) starting in 1998, but remains dateless while Citi and Stanchart have already had their fill.
Update: HSBC (somewhat predictably) denies that it will acquire KEB, saying that the quote above
"...is neither based on the fact nor from anyone from our bank," Lee Seung-hoon, a spokesman at HSBC in Seoul told Dow Jones Newswires.
He added that it's too early to say whether HSBC is interested in the acquisition of the country's fifth largest bank because it's not clear whether Lone Star wants to sell its stake or not.
It's certainly clear to me that Lone Star wants to sell - that's their business. Price is an altogether different issue, however. In any case, HSBC routinely denies everything until it happens; I would be frankly astounded if they have never talked with LS about KEB. Perhaps its not to be just now, tho.
Meanwhile, the Korea Times interviews John Bond and comes away with the headline "HSBC Says No Plan to Buy KEB ‘at Present’", which is something of a different kettle of fish as "at present" might mean anything from "this year" to "before dinner."
`We don’t have to do an acquisition to expand our business," said Sir John, explaining why he has previously explored acquiring Seoul Bank, Korea First Bank, and Koram Bank. "We can expand our business in Korea by investing in the businesses we have built over the past 25 years."
Another update: KEB chief and Lone Star appointee Richard Wacker says to the JoongAng Daily that it would be very difficult to see any sale of KEB this year.
According to Mr. Wacker, the Texas-based private equity fund told the managers of Korea Exchange Bank that there were no new developments regarding a sale. He added that his bank has received no requests from Lone Star to make preparations for a sale.
Well, not quite a denial from Lone Star, but perhaps another indication that the fund is holding out for a higher premium than HSBC is willing to pay.
Nevertheless, the HSBC rumour has stirred up the always-fierce Korean unions, who issued a pre-emptive HSBC-bashing manifesto saying they oppose a sale to the UK bank:
"We don't care whether a bidder for our bank is a foreign bank or local bank," the statement said. "But, as for HSBC, it does not offer regular jobs to its new employees. After hiring them for two years, the bank picks only one or two out of every 10 new workers as regular workers. We cannot accept that."
Absolutely final update: Hana Bank denies a report that it did not bid for KEB.
September 21, 2005
Deutsche Pips StanChart for 10% Huaxia Stake
Deutsche Bank is set to be the lead player in a consortium which will acquire almost 14% of Huaxia Bank for approximately $330m. Deutsche will have a 10% stake, with financial partners taking up the remainder, according to preliminary reports. DB was previously a reported bidder for a stake in Bank of Beijing which was sold to mighty Dutch masters ING Group. In tying up with Huaxia, DB beats out rumoured partner Standard Chartered, who will have to be content with their 20% of start-up Bohai Bank for now.
In an unrelated but comically-juxtaposed news item, DB CEO Josef Ackermann said today that the bank will focus on "organic growth" rather than acquisitions.
September 18, 2005
Wolf to Piglets: Naught to Fear
Citigroup regional CEO Robert Morse wants Thailand to liberalize its financial system further to allow more foreign participation, but says that local banks have nothing to fear from increased competition.
The Bangkok Post reports:
''Financial services companies compete at the level they have to compete,'' Mr Morse said in a recent interview in Bangkok.
''If you look at the past history around the world, the concern that local companies can't compete has proven mostly unfounded.''
''I don't think local firms give away anything to foreign institutions,'' Mr Morse said, as the headquarters of Bangkok Bank, the country's largest, looms in the skyline. ''If there was more competition, I believe that Thai companies would offer a positive surprise.''
This has been mostly the case in Thailand, where DBS, Stanchart, and UOB have failed to make much of an impact, and HSBC saw its bid to purchase the feculent Bangkok Metropolitan Bank rejected during the post-crisis fallout period.
Citibank, however, has been much more successful in positioning its retail brand and high-end corporate services in Thailand, and now employs some 2000 people despite its single-branch status.
HSBC to Issue Cards in India Without Income Proof
HSBC and hypermarket retailer Star India Bazaar have teamed up to launch a new co-branded credit card aimed at housewives. The Business Standard highlights that the card will be offered to applicants without an income verification requirement.
HSBC’s move to do away with the requirement of income proof, however, goes against the spirit of the RBI draft guidelines on credit cards that says banks must be responsible and issue cards only to those with independent financial means after completion of all know your customer (KYC) requirements.
Puneet Chaddha, head, cards and retail assets, HSBC, however, said, “Housewives will be the target customers for the card and this category of consuming class cannot be treated as without any income source. The credit limit on the card will be as low as Rs 3,000 to start with and is unlikely to create any credit hassles.” The card is being aimed at the 46.4 million consuming class households.
HSBC India does require minimum income on its regular and gold cards, along with verification documents.
September 10, 2005
HSBC Puts Asian Merchant Card Processing Into JV
Under the agreement, HSBC will transfer its existing credit card merchant acquiring businesses in 10 countries and territories in Asia to the new company. HSBC will retain a 44% interest in the joint venture and will transfer the remaining 56% in the new company to Global Payments for a consideration of US$67.2 million. The deal is subject to regulatory approvals and certain conditions.
September 06, 2005
The Giant Gets Hungry
The FT reports that Citi CEO Prince is planning to aggressively expand through acquisition in foreign markets (including Asia)...once they have worked through their regulatory problems. This despite the reports of some that last year's KorAm acquisition in Korea has been slower-than-expected to gain momentum. Perhaps all the naysayers are disgruntled employees?
If I were Chuck, I would be spending a lot of time thinking about what to buy in Asia.
September 02, 2005
Bohai Bank gets ready to go
Planned new national bank Bohai, which was reportedly approved in April, will unveil its initial organization plans in Beijing next Tuesday, per DJN. Tianjin-based Bohai is expected to gain credibility (and cash) from 19.9% founding shareholder StanChart.
Taureau dans un magasin de porcelaine?
BNP Paribas has revealed that it is the latest in a string of global banks chasing after stakes in Chinese institutions, having earmarked some of its €2bn a year war chest for China acquisitions. This morning's Standard has them looking at Huaxia Bank, along with Deutsche, SMFG, DBS, and SocGen. Tulips, anyone?