BBVA Sells $1.3 Billion China Citic Bank Stake, Boosting Capital

Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain’s second-biggest bank by market value, sold a stake in China Citic Bank Corp. (998) for 944 million euros ($1.3 billion) as it prepares to meet international capital requirements.

BBVA sold a 5.1 percent holding to Citic Group, the Chinese bank’s parent company, in a transaction it expects to close by the end of this year, the Spanish lender said in a statement on its website. The Bilbao, Spain-based bank will keep a 9.9 percent stake, while a charge related to a change in accounting will cut the lender’s net income by about 2.3 billion euros this year, according to the statement.

BBVA follows banks including Goldman Sachs Group Inc. and Bank of America Corp. in selling stakes in Chinese financial institutions as new international rules make it expensive to hold minority stakes in lenders. Foreign institutions have raised at least $14 billion from divesting shares in Chinese financial firms since the start of 2012, according to data compiled by Bloomberg.

“Given the difficult environment in its home market, it appears prudent for BBVA to raise capital at this juncture,” Sandy Mehta, chief executive officer of Value Investment Principals Ltd. in Hong Kong, wrote in an e-mail. “While they are trimming their holdings, they remain large shareholders.” Mehta’s company doesn’t own shares in Citic Bank, he said.

Photographer: Nelson Ching/Bloomberg

Signage for China Citic Bank Corp. Ltd. hangs outside a branch in Beijing. Close

Signage for China Citic Bank Corp. Ltd. hangs outside a branch in Beijing.

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Photographer: Nelson Ching/Bloomberg

Signage for China Citic Bank Corp. Ltd. hangs outside a branch in Beijing.

Citic Bank jumped as much as 5.3 percent to HK$4.37, the biggest intraday gain since July 23, and traded 4.3 percent higher at 2:07 p.m. in Hong Kong. The benchmark Hang Seng Index was little changed.

“The transaction is effectively a capital injection by the parent company into China Citic Bank,” Jim Antos, an analyst at Mizuho Securities Asia Ltd., wrote in an e-mail. The sale may be “only the first step in what could be a full divestment.”

The state-controlled Citic group of companies, established in 1979 by Rong Yiren to further former leader Deng Xiaoping’s experiment with open markets, has businesses spanning banking, broking and real estate to oil exploration. The group reports directly to China’s cabinet.

To contact Bloomberg News staff for this story: Nathaniel Espino in Beijing at nespino@bloomberg.net; Stephanie Tong in Hong Kong at stong17@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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