Citigroup to Raise Stake in Pudong Development Bank

Citigroup is set to increase its stake in Pudong Development Bank from 4.6 percent to 19.9 percent, in a deal that clears the way for the US bank to lead a bid for Guangdong Development Bank. The agreement allows Citigroup to invest in other Chinese lenders and enables it to lead a bid of approximately 22 billion yuan ($2.7 billion) for 85 percent of Guangdong Development Bank. This move is seen as a significant development in Citigroup's expansion plans in China, where it has trailed rivals like HSBC in tapping the country's $1.7 trillion household savings market.

Key Takeaways:

• Citigroup will increase its stake in Pudong Development Bank from 4.6 percent to 19.9 percent, with the option to invest in other Chinese lenders.
• The deal allows Citigroup to lead a bid of approximately 22 billion yuan ($2.7 billion) for 85 percent of Guangdong Development Bank.
• Citigroup's bid for Guangdong Bank requires approval from Pudong Bank due to a 2003 agreement that barred Citigroup from investing in another bank.
• The proposed bid values Guangdong Development Bank at more than twice its book value, higher than the price Bank of America paid for shares in China Construction Bank this year.
• Citigroup is bidding against groups led by Societe Generale of France and Ping An Insurance (Group) of China, with Ping An partnering with ABN AMRO.
• The US bank may pay approximately $800 million to increase its holdings, almost quadruple the price it paid three years ago.

Statistics:

• Citigroup's stake in Pudong Development Bank will increase from 4.6 percent to 19.9 percent.
• The bid for Guangdong Development Bank values the bank at more than twice its book value of 344.5 billion yuan in assets.
• Citigroup's current stake in Pudong Development Bank is 4.6 percent.
• The proposed bid is for 85 percent of Guangdong Development Bank, with a value of approximately 22 billion yuan.
• Guangdong Development Bank had 344.5 billion yuan of assets at the end of 2004.

Sources:

• Pudong Development Bank
• Evolution Securities China
• Reuters, "Citigroup to raise stake in Pudong Development Bank" (date not mentioned, but reported on November 25, as the date of the news article corresponds to the 25th of the month but the month is not specified in the provided text. As it lacks the month, no specific date can be mentioned.)
• Guangdong Development Bank's Web site
• "People familiar with the plan" (unnamed sources)
• "People involved in the transaction" (unnamed sources)