A (China) Bonus For The Big Banks

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As the big global banks are being bashed about the size of their bonuses, those that took a punt on big investments in their Chinese counterparts seem to be queuing up to sell their stakes (which, unlike all those sexy subprime investments, have created some real value).

First to go was UBS, as reported in the Wall Street Journal:

    “UBS AG sold its 1.3% stake in Bank of China Ltd. for US$808 million, according to people familiar with the matter, marking the first exit by a foreign strategic investor in a Chinese lender amid speculation that outside firms may cash out to replenish their weakened balance sheets.”

Bloomberg followed this up on January 8th by reporting that:

    “Royal Bank of Scotland Group Plc said it’s considering joining UBS AG and Hong Kong billionaire Li Ka- shing in selling Bank of China Ltd. shares as the end of a three-year lockup gives the U.K. lender a chance to raise funds.

    RBS, the biggest bank to be controlled by the U.K. government after a 20 billion-pound ($30 billion) bailout, said it is “examining” its $2.8 billion Bank of China stake as part of a companywide review initiated last quarter. Bank of China, the country’s third-largest lender, fell 7.9 percent in Hong Kong after Li sold 2 billion shares in the Beijing-based company.

    RBS Chief Executive Officer Stephen Hester may seek to use a $1.2 billion gain on the Bank of China stake to help repair a balance sheet crippled by more than 7 billion pounds ($11 billion) of writedowns in 2008. Foreign strategic investors hold about $46 billion of shares in China’s three largest banks, whose profits are slowing as the economy cools.

    …RBS, Bank of America Corp. and Goldman Sachs Group Inc. are among overseas financial firms that bought stakes in Chinese banks before they went public in 2005 and 2006. While the investors touted the “strategic” nature of their purchases, the $742 billion of writedowns and credit losses banks and brokers have recorded worldwide since 2007 added urgency to stake sales.

    …Bank of America sold $2.8 billion of shares in China Construction Bank Corp. yesterday, capitalizing on almost $14 billion of paper profits from its 2005 investment after paying almost $33 billion for Merrill Lynch & Co. in the biggest financial-services acquisition announced last year.

    Li, dubbed “Superman” by Hong Kong media for his investing skills, got 75 percent more for his Bank of China shares than he paid for them, netting him a profit of about $218 million. Li controls businesses spanning retail, real estate, container ports and energy in 57 countries.

    …Bank of China shares held by the RBS-led group, which also includes Merrill Lynch, fund managers D.E. Shaw & Co. LP, Oaktree Capital Management LLC and Och-Ziff Capital Management Group LLC., were locked up until the end of last year.

    The China Construction shares that Bank of America bought in 2005 became eligible for sale in October. Temasek Holdings Pte, the Singaporean state-owned investment company, can sell its 9.9 billion China Construction shares anytime, as its lockup agreement ended in August, according to the bank’s listing document.

    Goldman Sachs owns 16.5 billion shares in Industrial & Commercial Bank of China Ltd., the world’s largest bank by market value, and has agreed not to sell the shares until after April 28. American Express Co. and Allianz SE are among other strategic shareholders.”

Meanwhile, Chinese investments in foreign banks have not been looking so good…and it will be interesting to see the impact this has on China’s overseas direct investment strategy. More conservative, and more resources?

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