American Express to keep stake in China's ICBC

NEW YORK (Reuters) - American Express Co AXP.N will keep its 0.19 percent stake in China's largest bank, ICBC 1398.HK601398.SS, signaling the credit card company has left the worst of the financial crisis behind.

“It suggests that, number one, there is no need for additional liquidity at this point and, number two, it speaks of China as a very important growth market for them going forward”, said Michael Taiano, an analyst at Sandler O’Neill.

In April, American Express sold half of its stake in ICBC in a move to tuck away cash in a grim economic climate. The sale generated a gain of $210 million, or $132 million after tax.

The lock-up period for the remaining shares expires on Tuesday. American Express still holds 638,061,117 H shares of ICBC.

American Express, the biggest U.S. credit card issuer by purchase volume, said it would re-evaluate its holding in Industrial and Commercial Bank of China, the world’s largest bank by market value, from time to time depending on market conditions.

When China restructured its major banks several years ago, Western financial institutions took stakes in several Chinese lenders, hoping to profit from the investments while forging a strategic partnership in a fast-growing country.

ICBC went from being a bailed-out bank to the world’s largest and most profitable, with a market capitalization of more than $248 billion.

But after the financial crisis took hold last year, Western banks moved quickly to raise much-needed cash by selling out of their Chinese stakes.

American Express was the fastest growing credit card company between 2003 and 2007 as it relaxed lending standards. But it paid a heavy price when the bubble burst and bad loans rose to record highs.

The company cut 11,000 jobs and reduced spending to save $2.5 billion. It also morphed into a bank holding company to get access to funding from the Federal Reserve and received government bailout funds, which have been repaid.

Analysts have said American Express, which relies on affluent and corporate customers more than its peers, is recovering faster from the financial meltdown as economic jitters ease.

“There is a better outlook than going back six months ago, when liquidity was the most important thing,” Taiano said. “There is increasingly a reemphasis on investment and growth.”

American Express shares rose 1.14 percent to $35.35 in early trading on the New York Stock Exchange.

Reporting by Juan Lagorio; editing by John Wallace