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CIFH buy may boost CITIC's global reach

By Hu Yuanyuan (China Daily)
Updated: 2009-05-12 08:10

A man walks into a China CITIC Bank Corp branch in Shanghai. [Agencies]

China CITIC Bank will place risk integration and capital management on top of the agenda after taking control of a 70.32-percent stake in CITIC International Financial Holdings Ltd (CIFH) for HK$13.6 billion, a company executive said yesterday.

"The acquisition of CIFH will offer CITIC Bank a good platform to compete globally, help us cut operating cost and make it well positioned in running the offshore renminbi settlement business," Cao Tong, vice-president of CITIC Bank, said in a conference call yesterday. "We will focus first on the integration of the risk and capital management of the two entities."

Cao said the deal has happened at the right time, and at the right price.

Related readings:  CITIC Bank to acquire affiliate for $1.8b  CITIC Securities Q1 profit falls 40%  China CITIC Bank reports 60% net profit increase in 2008  CITIC unit in talks to buy Macquarie China asset

CITIC Bank announced the acquisition plan in a statement to the Hong Kong stock exchange on Sunday, but the cash deal still requires shareholder approval.

The stake in the investment company, which was delisted in Hong Kong on Nov 5, was previously a wholly owned subsidiary of CITIC Group, China's top financial conglomerate. The remaining 29.68 percent of the company is with Spain's second-largest bank BBVA.

The privatization of CIFH, in fact, is the prelude for an acquisition deal by the CITIC Bank. Kong Dan, chairman of CITIC Group, told China Daily in an early interview that the group would like to restructure its mainland and overseas financial platforms and tap into global opportunities through a unified brand.

CIFH currently has three divisions - CITIC Ka Wah Bank (CKWB), CITIC Capital and CITIC International Assets Management. The unaudited net asset value of CIFH was about HK$9.5 billion in 2008.

"The acquisition may dent CITIC Bank's capital adequacy ratio by 0.9 percentage points from the existing 13.42 percent," said Wang Kang, general manager of the accounting department of CITIC Bank. "But we see no need to issue subordinated bonds in the short term."

CKWB's name will be unchanged for the time being; it may later be renamed as CITIC Bank International, Cao said.

Since CKWB is present in the US and China's Macao, CITIC Bank does not have any plan to set up overseas outlets before the full integration with the bank, said Cao.

During the past two years, CKWB wrote off HK$2 billion due to the financial crisis, and its non-performing loans ratio stood at 1.89 percent last year.