Oct. 17 (Bloomberg) -- Deutsche Bank AG, Germany's largest lender, and Sal. Oppenheim Jr. & Cie KgaA will buy a 14 percent stake in China's Huaxia Bank Co., the latest overseas financial institutions to expand in the world's most populous nation.

Deutsche Bank and Cologne, Germany-based Sal. Oppenheim, the largest independent private bank in Europe, will buy 587.2 million shares, Huaxia said in a statement today. Deutsche Bank will own 9.9 percent of the Beijing-based bank, China's fourth- largest publicly traded lender, and Sal. Oppenheim 4.1 percent, the statement said, without disclosing a transaction price.

Deutsche Bank Chief Executive Josef Ackermann, 57, is expanding the company outside Germany's lagging economy into faster-growing markets such as the U.S., China and India. It joins Royal Bank of Scotland Plc, HSBC Holdings Plc, Bank of America Corp. and other banks in buying stakes in Chinese lenders to access to an economy that tripled in size in the past decade.

``If they don't link up with local banks, they can't compete with HSBC and other banks'' in China, said Zhang Dawei, a banking analyst at China United Securities Co. in Shanghai. ``China's a big market and organic growth will be slow because of entry barriers.''

Huaxia reported first-half profit rose 29 percent to 640 million yuan ($79 million) from 495 million yuan a year earlier as it made more money from loans and investments. The bank's shares rose 2 percent to 4.21 yuan in Shanghai trading as of 11:06 a.m. The class of stock purchased by Deutsche Bank and Sal. Oppenheim isn't tradable.

Ownership Limits

Overseas investors are permitted to own a maximum 25 percent of a Chinese lender, with any single investor limited to a 20 percent holding. The Deutsche Bank-led group planned to acquire the Huaxia stake for about $330 million, Reuters reported on Sept. 21, citing unidentified officials at the Chinese lender.

European and U.S. banks spent more than $8.2 billion buying stakes in China's lenders since the start of last year to tap an economy that's growing at more than twice the pace of the U.S. and at least nine times that of Germany. China is opening the banking industry to foreign competition as agreed when it joined the World Trade Organization in 2001.

Royal Bank of Scotland, Britain's No. 2 bank, and partners including Merrill Lynch & Co. announced plans on Aug. 18 to pay $3.1 billion for 10 percent of Bank of China, the country's No. 2 lender. Bank of America, the second-biggest U.S. lender, agreed in June to pay $3 billion for more than 9 percent of China Construction Bank. HSBC last year bought 20 percent of Bank of Communications, China's fifth-biggest lender, for $1.75 billion.

Outside Germany

Deutsche Bank, based in Frankfurt, has invested more than $6.6 billion in acquisitions involving financial companies almost entirely outside Germany during the past five years, according to Bloomberg data. The purchases were topped by the $2.5 billion acquisition of Zurich Financial Services AG's U.S. Scudder fund unit in 2001.

The bank, now looking more to emerging markets, is interested in buying the 60 percent stake it doesn't already own in Russian brokerage United Financial Group, newspapers including Vedomosti have reported.

In March, Deutsche Bank agreed to buy 20 percent of Harvest Fund Management Co. It also bought the remaining 60 percent stake in Istanbul-based broker Bender Securities in April to take advantage of Turkey's booming economy and surging stock market.

Sal. Oppenheim in August said it bought Services Generaux de Gestion SA in Luxembourg to expand its private banking division. No terms were disclosed.

Shareholder Approval

Huaxia and Deutsche Bank will sign an agreement to cooperate on credit card issuance on Nov. 30, today's statement said. Shareholders of the Chinese lender will meet on Nov. 17 to vote on the transaction, it said.

Deutsche Bank and Sal. Oppenheim will buy the shares from a group of 18 investors, including Beijing Shougang Corp.

Huaxia's capital-adequacy ratio stood at 8.41 percent as of June 30 compared with 8.61 percent at the end of 2004, above the minimum 8 percent required by China's banking regulators.

Huaxia's largest shareholder is state-owned steelmaker Shougang Corp., which spun off the bank from the group in 1992.

To contact the reporter on this story: Michele Batchelor in Hong Kong mbatchelor@bloomberg.net

Last Updated: October 16, 2005 23:18 EDT