Scotiabank, IFC eyeing stake in China's Dalian Bank
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Canada's second-largest bank by market value, Scotiabank plans to invest about two billion yuan or $257m for a 20% stake -- the maximum allowable for a single foreign investor under Chinese law, two sources told Reuters News Agency.
IFC, the World Bank's private investment arm, plans to buy a 5% stake in the Chinese lender in the northeastern port city of Dalian for 500m yuan, they said.
"Scotiabank will become the foreign strategic partner of Dalian Bank, while IFC will be a financial investor," said a banking source, who declined to be identified.
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"Dalian Bank has a good network coverage in northern China and that area has become a government focus for economic development in the next few years," the source added.
Dalian Bank plans to sell 1.13b new shares, or 25% of its share capital to be enlarged by the offer, at about 2.2 yuan apiece, through a private placement with Scotiabank and IFC, the sources said.
An agreement on the deal is likely to be signed around the lunar new year in mid-February, they said.
Scotiabank spokesman Frank Switzer declined to comment, but said the bank is "certainly interested in growing in China." IFC and Dalian Bank declined to comment.
If successful, it would become Scotiabank's second bank acquisition in China. In 2004, Scotiabank and IFC agreed to buy a combined 25% stake in the small-sized Xi'an City Commercial Bank in northwestern China.
IFC has bought into several Chinese city commercial banks in recent years, including Bank of Shanghai, in which HSBC Holdings PLC holds an 8%-stake.
"Scotiabank has been looking for a stronger partner in China for a long time, and Dalian Bank looks like a good choice for it because the deal can help Scotiabank gain access to a huge retail market in northern China so quickly," another source said.
Dalian Bank had total assets of 40b yuan at the end of last year, and is a major player among the country's roughly 100 second-tier city commercial banks.
In an interview with Reuters on Dec. 4, Robert Pitfield, an executive vice-president at Scotiabank's international banking business, said the bank wants a Chinese partner that already has its own network and shows the ability to grow in the domestic market. He had declined to name any potential partner.
Canadian companies have high hopes for a trip to China this week by Finance Minister Jim Flaherty, expecting him to thaw chilled relations with Beijing and help them catch up with competitors in investment and trade.
Financial services are a leading sector in terms of Canadian investment in China. Bank of Montreal, Royal Bank of Canada, Manulife Financial Corp. and Sun Life Financial Inc. have set up shop in China.
Bank of Montreal, the oldest Canadian bank, has decided to hold its global board meeting in Shanghai, China's financial hub, next week.
See also:
Emerson, Flaherty to meet with Chinese high level ministers
Scotiabank eyes second China bank deal
Scotia Bank expands into China, India
Canadian Banks in China
Tags: china, canada, banking, finance, scotiabank, IFC, dalian bank, investment
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