Minsheng Bank to take first Chinese stake in US lender
Posted: 08 October 2007 1812 hrs

	Photos  of

SHANGHAI: China Minsheng Bank said on Monday it planned to buy 9.9 percent of UCBH Holdings Inc for up to 317 million dollars in the first strategic investment by a Chinese lender in a US bank.

Minsheng Bank, which currently has no branches abroad, will have the option to increase its stake in San Francisco-based UCBH to 20 percent in future, the mid-sized Chinese bank said in a statement with the Shanghai Stock Exchange.

"Acquiring a stake in UCBH is mainly targeted at being able to use its branch network," said Wang Qian, a Shanghai-based analyst with Industrial Securities.

"UCBH mainly serves ethnic Chinese in the United States, which will facilitate Minsheng's ambition of expanding its overseas operations."

The investment plan, to be conducted in two phases, is still subject to approval from both Chinese and US regulators, Minsheng said.

Under the plan, Minsheng bank will first buy about 5.35 million new shares issued by UCBH, or 4.9 percent of the US lender's enlarged capital, for 97 million to 145 million dollars.

In the second phase, it will increase its stake to 9.9 percent by the end of August next year for 115 to 172 million dollars through either another share placement or purchasing shares from UCBH's existing shareholders.

The bank said the investment in UCBH, which has 70 branches across the US, will "provide the company a platform to access the US market".

Minsheng Bank also expected that "synergy effects coming from cooperation and integration of the two lenders will help us better grasp the opportunity of growing trade between China and the US".

UCBH had assets of 10.65 billion dollars as of June and it mainly provides commercial banking services to small and mid-sized corporates, as well as consumers and private banking.

While this is the first Chinese foray of this kind into the US market, it might not be the last, according to observers.

"It's a strategy that other Chinese banks might consider," said Gu Junlei, a Shanghai-based analyst with Orient Securities.

"After all, forex reserves are quite high and the yuan is appreciating against the dollar. It still depends on the situation of the individual bank. But the current backdrop creates an advantageous environment for such acquisitions."

However the jury is still out on the type of reaction that Minsheng Bank's move might trigger in the United States.

When state-controlled China National Offshore Oil Corp. launched a bid for US oil company Unocal, it set off widespread fears about selling national assets to China, not least among American lawmakers.

"There'll definitely be some concern, but it all depends on the attitude of the US authorities," said Gu.

"After all, Minsheng is not taking a too large stake, and even after the entire acquisition is completed, it will just own 9.9 percent."


- AFP/so