* BicBanco shares are up 62 pct since Sept. 23 on deal
* BicBanco says there is progress on talks about potential
* CCB shares up 0.9 percent on Wednesday
By Denny Thomas
HONG KONG, Oct 30 China Construction Bank Corp
is in advanced talks to buy Brazil's Banco Industrial e
Comercial SA, a person familiar with the matter told
Reuters, as China's No. 2 lender swoops in on a mid-sized lender
battered down by bad debt.
CCB, through the purchase, would gain direct
access to Chinese companies buying into South America's natural
BicBanco has a market value of 1.7 billion reais ($778
million) after its shares rose 62 percent since Sept. 23 after
takeover reports in local media.
If successful, the purchase would be the first of a
Brazilian bank by one of China's big four state lenders since
going public after a government restructuring. It would also be
the biggest Chinese bank deal in Latin America.
BicBanco, which lends primarily to companies, said in a
securities filing on Tuesday that its "controlling shareholders
are always open to business opportunities and, in that regard,
there has been progress in negotiations over the sale of a
controlling stake in the company," though it has not signed any
The Sao Paulo-based bank is being advised by Citigroup Inc
, the person, who asked not to be identified as the
discussions were confidential, said on Wednesday.
CCB and BicBanco did not immediately respond to a request
for comment. Citigroup declined to comment.
CCB shares, valued at $189 billion, were up 0.9 percent on
Wednesday in line with the broader market rise.
BicBanco shares, despite the rally, still trade at trailing
price to book ratio of 0.86 whereas CCB trades at 1.1.
In July, Moody's Investors Service raised concern about
BicBanco's financial position, saying the bank's profitability
and asset quality have been under pressure following consecutive
quarters of high provisioning costs and credit losses.
"New non performing loan formation remains high, despite
management's decision to refocus its target market towards lower
risk, lower margin borrowers," Moody's said.
Chinese banks have been looking to win custom from
compatriot companies operating overseas in response to a slowing
market at home.
Two groups of Chinese miners, in partnerships that will pit
giant Chinalco Mining Corp International against rival
Minmetals, lead a shortlist of suitors for Glencore Xstrata
PLC's $5.9 billion Las Bambas copper mine in Peru,
Reuters reported earlier this month.
CCB has the most overseas exposure among China's big four
and is present in 36 countries.
In May last year, CCB was in talks to buy the Brazilian
assets of German bank WestLB, according to media reports at the
time, though another suitor won.
ICBC also bought 80 percent of Standard Bank's Argentina SA
from Standard Bank London Holdings PLC for an
estimated $600 million in cash in 2011.
Agricultural Bank of China Ltd is in talks to
bid for Hong Kong lender Wing Hang Bank Ltd, Reuters
Founded in 1938 in the northeastern Brazilian state of
Ceara, BicBanco focuses on medium-sized companies with annual
revenues of up to $230 million.
The bank had 13.63 billion reais in its credit portfolio at
the end of July, with 92.5 percent of the loans going to
businesses who use the money as working capital for their
short-term funding needs, according to its most recent earnings
BicBanco had 16.82 billion reais of assets at the end of the
second quarter to July 31 and a Basel Tier 1 ratio of 12.32
Bloomberg News earlier reported the talks with CCB.
The Beijing-based bank reported its slowest third-quarter
earnings growth in more than five years on Sunday, hit by an
increase in loan loss provisions.