Goldman Sachs will pick up stake in top Chinese bank

An investment group led by Goldman Sachs has received approval from the Chinese State Council to acquire 10 per cent stake in the Industrial and Commercial Bank of China (ICBC). The group will pay USD 3.7 billion for the stake in China’s biggest lender. The State Council has also sanctioned a USD 1.2 billion investment by the nation’s Social Security Fund.

In August, Goldman’s private equity arm had agreed to team up with European insurer Allianz and American Express for the ICBC deal. The 10 per cent holding will be split between these three units. The sale price is equivalent to about 1.2 times the bank’s book value, based on paid-in capital of 248 billion Yuan as of June 30. The investment will facilitate ICBC’s planned USD 10 billion initial public offering next year. The Goldman fund may agree to increase its stake in ICBC during the IPO.

Meanwhile, a Kuwait state investment agency, Kuwait Investment Office (KIO) is also looking to buy a strategic stake in ICBC. KIO, a government agency responsible for managing some of the OPEC nation’s oil wealth, wishes to sign a MoU with the Chinese bank.

ICBC is following the lead of China Construction Bank Corp, the country’s No 3 bank, which raised about USD 8 billion in October in the world’s biggest IPO in four years and whose shares are currently trading at more than two times its book value. Many foreign investment firms are picking up stakes in Chinese banks eyeing big gains once the firms gets listed. Goldman Sachs and other investors too expect to book huge profits once ICBC goes public next year.