Goldman Sachs Group Inc. (GS) raised $1 billion from selling a stake in Industrial & Commercial Bank of China Ltd. after the world’s largest lender by market value rose almost 50 percent from last year’s low.
The company sold 1.35 billion shares at HK$5.77 each, 3 percent lower than the Chinese lender’s HK$5.95 (1398) closing price in Hong Kong yesterday, the New York-based bank said. Goldman Sachs has no immediate plans to sell more stock, Edward Naylor, a Hong Kong-based spokesman, said.
Investing in local lenders in China is reaping bigger profits for foreign banks than operating their own franchises in the world’s second-largest banking market. The Western firms’ gains on those stakes are set to exceed their investments, with more than $20 billion in holdings remaining even after they recouped about $24 billion. Shares of ICBC, which is headed for its seventh year of record profit, fell.
“The sale may mark an end to the recent rally in Chinese bank shares because it does reflect a neutral, if not pessimistic view, of their valuations and ability to sustain profit growth,” said Chen Xingyu, a Shanghai-based analyst at Phillip Securities Pte. “Goldman can put the proceeds from the ICBC sale to better use.”
The Wall Street firm is selling down an investment first made in January 2006 when Goldman Sachs and client funds it manages agreed to invest $2.58 billion in Beijing-based ICBC. The U.S. bank and the funds offloaded ICBC shares at least four times before the latest sale, data compiled by Bloomberg show.
ICBC fell 2.2 percent, the most since Nov. 8, to HK$5.82 in Hong Kong. The stock had climbed about 49 percent as of yesterday from its 2012-low on July 12.
The shares have gained 5.8 percent this year and about 13 percent since Goldman Sachs’s private-equity funds sold a $2.5 billion stake in April to Singapore’s Temasek Holdings Pte. The U.S. bank and its funds had previously divested at least $7.76 billion worth of ICBC shares in four sales since June 2009, data compiled by Bloomberg show.
Global financial firms including Temasek, Bank of America Corp. and Citigroup Inc. invested a combined $33 billion in Chinese banks from 2001 to 2009, according to data compiled by the China Banking Regulatory Commission.
Their profits from reducing those stakes overshadow the $10 billion that global banks jointly earned over the past decade from their own franchises in China, the regulator’s data show.
BNP Paribas SA, France’s largest bank, is among the latest global financial firms to boost investments in China as the local lenders’ profits defy the global economic slowdown and rise to a record. The Paris-based company said last month it plans to bolster its stake in Bank of Nanjing Co. to as much as 20 percent from about 15 percent.
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