Temasek Increases Stake in ICBC as Goldman Ends Holding

Temasek Holdings Pte, Singapore’s state-owned investment company, boosted its stake in Industrial & Commercial Bank of China Ltd. for the third time in a year as Goldman Sachs Group Inc. exited its seven-year-old investment.

Temasek bought 280 million shares in the world’s largest bank by market value at an average price of HK$5.50 a share, or a total of HK$1.54 billion ($198 million), according to a Hong Kong stock exchange statement yesterday. Goldman Sachs raised $1.1 billion by selling 1.58 billion shares in ICBC on the same day, according to a person familiar with the matter.

The purchase underscores Temasek’s interest in China’s largest state-controlled banks, leading it to accumulate $21 billion of holdings in Beijing-based ICBC, China Construction Bank Corp. and Bank of China Ltd. over the past two years. Global firms including Goldman Sachs and Bank of America Corp. have divested holdings as new capital rules known as Basel III make it more expensive to hold minority stakes in banks.

“Temasek has a different strategy and timetable for the investments, and it will probably hold these stakes for longer,” said Wilson Li, a Shenzhen-based analyst at Guotai Junan Securities Co. “Temasek is different from Goldman Sachs and other investors because it is not subject to the capital requirement which basically forced all those global banks to get rid of non-core businesses.”

China Appetite

Temasek bought 3.55 billion ICBC shares at HK$5.05 apiece from Goldman Sachs in April last year and then disclosed the purchase of a further 83.7 million shares in the Chinese lender the following month. Yesterday’s purchase boosted its total holding to 7.04 percent of ICBC’s Hong Kong-listed shares from 6.71 percent, according to the filing.

Global financial firms including Temasek have invested $33 billion in Chinese lenders from 2001 to 2009, according to regulatory data. They still own at least $45 billion of stakes in the local banks, data compiled by Bloomberg show.

The Singapore company, which managed S$198 billion ($157 billion) of assets as of March 2012, also owns 7.4 percent of Construction Bank shares traded in Hong Kong, valued at $14.9 billion, and 3.7 percent of Bank of China’s Hong Kong-listed shares worth about $1.5 billion, according to data compiled by Bloomberg.

Jeffrey Fang, a spokesman for Temasek in Singapore, confirmed the latest investment and declined to comment further.

Capital Constraints

Goldman Sachs joins Citigroup Inc. and Bank of America in cutting holdings in China as new rules set by the Basel Committee on Banking Supervision require punitive capital deductions for holding minority investments in other financial institutions. New York-based Goldman Sachs has reaped about $12 billion in sales proceeds and dividends from its $2.58 billion investment in ICBC, calculations by Macquarie Capital Securities Ltd. showed.

Goldman Sachs and its client funds offloaded ICBC shares at least five times before the latest transaction after first investing in ICBC in 2006.

The Chinese lender, which is the world’s most profitable bank, last month reported a 12 percent increase in first-quarter profit, defying a sluggish domestic economy to boost lending.

ICBC rose 0.2 percent to close at HK$5.53 in Hong Kong. Construction Bank fell 0.2 percent while Bank of China lost 0.8 percent.

The opening of Hong Kong’s exchange was delayed today after the city issued a “black” rainstorm warning because of rainfall expected to exceed 70 millimeters an hour.

China’s biggest banks are trading near record-low valuations on concern that profit growth may slow as loans sour and the government deregulates interest rates. ICBC trades at about six times estimated 2013 earnings, down from a high of 21 times in early 2008, data compiled by Bloomberg show.

Temasek isn’t the only Singapore financial company to expand in the region to tap growth outside its home market. DBS Group Holdings Ltd., Southeast Asia’s largest lender, yesterday won approval from Indonesia’s central bank to acquire a $2.75 billion stake in PT Bank Danamon Indonesia.

— With assistance by Joshua Fellman, and Jun Luo

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