BBVA undecided on Citic stake increase
MADRID (Reuters) - BBVA (BBVA.MC), Spain's second-largest bank, has yet to decide whether to buy a further 5 percent of China's Citic Bank (0998.HK), cementing its investment in the country, ahead of a deadline next week.
Earlier on Monday, the Financial Times cited people familiar with the matter as saying BBVA is expected to exercise an option to lift its stake in China's seventh-largest lender by assets to 15 percent, an investment of 1.1 billion euros ($1.6 billion).
The option on Citic, which sources familiar with the deal said expires on December 3, is part of BBVA's original agreement with its Chinese partner and would be struck at HK$6.45/share, close to Citic's current share price.
"No decision has been made for the next 5 percent of Citic," a BBVA spokeswoman told Reuters on Monday.
Sources close to BBVA said raising the Citic stake would be in line with the bank's strategy to expand in geographical areas where it already has critical mass, primarily Latin America, the United States and China.
BBVA recently made a 2 billion euro convertible bond issue and is organically generating capital every quarter, so analysts said it would not need to hike capital to cement its investment in China.
BBVA has already invested over 2 billion euros in Asia, which it considers a long-term strategic investment, to control a 10 percent stake in Citic and 30 percent of CIFH, the Hong Kong based holding which is part of Citic Group.
At 1145 GMT, BBVA shares were up 2.1 percent at 12.985 euros, broadly in line with the Dow Jones European bank index .SX7P.
"Although the first impression could be negative as the investment in China has not reached the expected profitability levels, we believe that this transaction shows that BBVA's strategy remains unchanged," analysts at Portuguese bank Espirito Santo said in a note to clients.
"The transaction shows the bank's focus in the trade finance business and also reveals BBVA's commitment to the potential business flows between Asia and Latin America, where BBVA could capitalize its presence in both geographical areas," Espirito Santo said.
(Additional reporting by Judy MacInnes; Editing by Simon Jessop and Erica Billingham)
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