Takeover time

Beijing, Dec. 18 (Reuters): A consortium led by Citigroup Inc has won final regulatory approval for its $3.1-billion purchase of 85.6 per cent of Guangdong Development Bank (GDB), the China Banking Regulatory Commission (CBRC) said on Monday, paving the way for a restructuring of the troubled southern China lender.

The CBRC’s stamp of approval was the final chapter in a year-and-a-half battle for control of GDB between and France’s Societe Generale, which had assembled its own bidding team.

Citigroup, China Life Insurance Co and China’s State Grid Corp are each taking 20 per cent of GDB, while International Business Machines will own 4.74 per cent and China’s CITIC Investment and Puhua Investment will take 12.85 per cent and 8 per cent, respectively.

A Citigroup spokesman declined immediate comment.

According to the agreement on the Guangdong bank’s restructuring plan, Citigroup’s consortium is scheduled to complete the transaction on Monday, the CBRC said.

Citigroup and its investor team now face the challenging task of cleaning up GDB, which lost its president last week when Zhang Guanghua resigned to become designated CEO at rival China Merchants Bank Co, according to sources.

The Chinese lender has more than 500 branches and a strong position in Guangdong, China’s richest province, but it had more than $6 billion in bad loans at the end of last year, according to sources.

That would give GDB a non-performing loan ratio of 25 per cent in a country where the average is 8 per cent.

But China’s booming economic growth has foreign lenders paying top dollar for banking assets, particularly as the market opens to foreign competition under Beijing’s World Trade Organisation obligations.

Citigroup, which is also in talks to increase its stake in Shanghai Pudong Development Bank to the maximum allowable 19.9 per cent from below 5 per cent, has applied to Beijing for local incorporation under the new rules.