* HSBC places fair value of $468.2 million on stake as of
* Santander says eyeing China trade flows with Latam
* Bank of Shanghai expected to list shares in HK, Shanghai
By Sarah White and Matt Scuffham
MADRID/LONDON, Dec 11 Santander,
Spain's largest bank, has agreed to buy HSBC's 8
percent stake in Bank of Shanghai, expanding its presence in
China at a time when other foreign banks have hit the exit
Santander, which already has a consumer finance venture
and a car financing business in China, said on Tuesday the
deal also included a cooperation agreement with the Chinese
bank, taking the value of its investment to 470 million euros
The deal is seen helping Bank of Shanghai move a step
forward with an expected initial public offering by giving it a
secure foreign investment and a valuation. The Chinese lender is
seeking an IPO in Shanghai and Hong Kong with a combined value
of about $2 billion.
Bank of Shanghai officials could not be immediately reached
for comment on the deal or the IPO plans.
HSBC had earlier flagged its interest in selling the stake,
which it said had a fair value of HK$3.63 billion ($468.18
million) as of Sept. 30. The Asia-focused bank paid $62.6
million for the holding in Dec. 2001.
HSBC has also been selling minority holdings as part
of a restructuring since the start of 2011. It has cut 46,000
jobs and sold or closed 52 businesses, including a minority
stake in Chinese insurer Ping An.
U.S. and European banks, including Bank of
America, Goldman Sachs and UBS have
also sold their stakes in Chinese banks, booking hefty profits
from holdings that yielded few strategic advantages. Regulatory
and other business reasons also prompted the sales.
Santander, however, is moving in the other direction.
The bank said it would help state-controlled Bank of
Shanghai, which it said had 98 billion euros of assets and was
the second-biggest city-focused commercial and retail bank in
the country, with training in areas such as risk management.
It is also planning to develop a joint wholesale banking
business, adding to what Santander might be able to offer some
of its big corporate clients in Latin America, a key hub that
provides around 50 percent of its profits.
"Santander is also developing investment banking activities
in China, mainly based on financing the substantial trade flows
between the Asian giant and Latin America," the bank said in a
statement which listed existing ventures in China.
Asia-focused HSBC said China was still one of its priority
markets and Chief Executive Stuart Gulliver has said in recent
months that its 19 percent stake in Bank of Communications
The transaction is subject to approval from the China
Banking Regulatory Commission.
Gulliver had said in May that HSBC could sell its Bank of
Shanghai stake for between $500 million and $600 million.
Santander declined to comment on Tuesday on how much it had paid
for the 8 percent stake alone.
Santander also has 20 percent of Bank of Beijing's consumer
finance subsidiary and earlier this year launched a 50/50 joint
venture in car financing with Anhui Jianghuai Automobile (JAC)
Peers have been selling out of China in part because some
struggled to make quick progress with their Chinese joint
ventures, and also because they are bulking up capital ahead of
more stringent international solvency rules.
Santander's main rival in Spain, BBVA, recently
trimmed its stake in China's CITIC Bank Corp to just
under 10 percent, as having stakes in foreign banks will become
more expensive over that limit under new capital regulations.
Santander has sold assets elsewhere in recent years,
including in Latin America. But it has been in a more
acquisitive mode in recent months, even in its home market
Spain, which is slowly emerging from a five-year economic slump.
In October it spent 140 million euros on a 51 percent stake
in the Spain's largest consumer finance business, run by
department store chain El Corte Ingles.
Santander said it expected its deal with Bank of Shanghai to
close in the first half of 2014. It said the transaction would
impact its capital to risk-weighted assets ratio by about 0.01