RPT-UPDATE 3-BBVA to raise stake in China's CITIC as Spain slows

(Repeats story sent late on Tuesday with no changes to text)

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By Jane Barrett

MADRID, June 3 (Reuters) - Spain's BBVA (BBVA.MC) reached a deal to double its stakes in Chinese bank CITIC (0998.HK) and its international arm CIFH 0183.HK, raising its exposure to fast-growing Asia as its home market slows sharply.

Spain's second-largest bank said on Tuesday it would pay about 800 million euros ($1.3 billion) to buy the stakes and fund future business plans at CITIC International Financial Holdings Ltd (CIFH), which will be delisted as part of the deal.

BBVA used the proceeds of a Spanish boom to expand in Latin America and the United States in the last few years and in late 2006 bought 5 percent of CITIC and 15 percent of CIFH for 989 million euros to get into the coveted Chinese market.

It had options to double the stakes from mid-2008.

Top executives have said Asia is the next frontier for the bank, which is trying to set up several joint ventures with CITIC in areas including asset management and private banking and is also testing the water for an entry into India.

Thanks to strict regulation, Spanish banks had no subprime exposure and have been spared huge writedowns, asset sales and rights issues seen at other global rivals, but analysts worry they will be hit by a sharp economic slowdown in Spain.

Most banks have tried to diversify out of their home market, with BBVA's arch-rival Santander (SAN.MC) buying Banco Real in Brazil, another major emerging economy, last year. Other mid-sized Spanish banks have bought smaller lenders in Florida.

BBVA will now own 10.07 percent of CITIC (601998.SS) and 30 percent of CIFH. It also has an option to raise its stake in CITIC to up to 15 percent in the next two years.

NO HUGE PREMIUM The deal is dependent on the Asian banks' parent CITIC Group buying out CIFH minorities who own about 30 percent of the bank, and delisting it from the Hong Kong stock exchange. CIFH gave no details of the proposal in a statement.

Investors said they did not expect the CIFH buyout to command a high premium.

"BBVA is unlikely to pay a huge premium to increase its stake in CIFH given BBVA is already a shareholder of CIFH, and ... it does not need to bid against other competitors," said Michael Chung, fund manager at Iventure Investment Management Ltd in Hong Kong.

Chung also expected CITIC Group not to offer a huge premium for CIFH despite a rise in Hong Kong bank valuations after China Merchants Bank (3968.HK) agreed last week to buy control of Wing Lung Bank 0096.HK at 2.9 times 2007 book value.

Analysts following BBVA welcomed the deal to increase its stake in China as further diversification but said the move had been well flagged by management.

"They always had the call options so this is no surprise. The only change is that they had originally said the stakes could cost about 1 billion euros and they're paying 800 million," said one analyst.

BBVA stock was down 0.1 percent at 14.06 euros at 1200 GMT while CITIC, mainland China's seventh biggest bank by assets, closed down 1.9 percent. CIFH shares were suspended before the announcement.

Shares in ICBC (Asia) (0349.HK), the Hong Kong unit of Industrial and Commercial Bank of China (1398.HK), the world's most valuable bank, were up nearly 8 percent as investors bet ICBC might make a similar move. (Additional reporting by Tony Munroe and Kennix Chim in Hong Kong; Editing by Sue Thomas and David Holmes)