Due to US mortgages losses, Bear Stearns’ market value has declined 26% this year to $17.4bn in mid-October, making the investment bank worth less than half of Citic’s brokerage arm, Citic Securities.
Some analysts consider Bear Stearn a bargain but they also warn that the subprime crisis is not over yet and that valuations might fall further.
The Chinese bank is not the only one eyeing up Bear Stearns. Citic may face competition from Warren Buffet, the billionaire chairman of Berkshire Hathaway, Bank of America, Wachovia and China Construction Bank. Joseph Lewis, the billionaire currency trader, has already taken an interest in Bear Stearns, paying $860.4m for a 7% stake in September.
However, the bank has not welcomed all this interest and in October Bear Stearns president Alan Schwartz said the company would weather the current market storm and was not looking for funding from an outside investor.
The deal would fit with Chinese banks’ plans to expand abroad through acquisitions. China Minsheng Banking Corporation, the country’s first privately owned bank, has announced it may buy a stake in UCBH Holdings, the biggest bank serving the Chinese community in the US. Industrial and Commercial Bank and China Construction Bank have both acquired overseas lenders in the past year.
ABN AMRO deal victors
ABN AMRO’s shareholders have accepted the RBS-led consortium’s offer to buy the Dutch bank, ending the hard-fought bid battle with the UK’s Barclays. The consortium, also consisting of Spain’s Santander and Belgian/Dutch bank Fortis, offered €71bn ($101bn) for the bank. Barclays’ offer was €67.5bn. The three banks will split ABN AMRO’s business, each incorporating a part of its operations. Some divisions or subsidiaries, such as broker Hoare Govett, might be sold.
Virgin, the diversified group led by billionaire entrepreneur Richard Branson, has been leading a consortium to bid for Northern Rock, the troubled UK lender. The deal would transfer Virgin’s consumer finance business, Virgin Money, into the bank in exchange for equity. Virgin Money is thought to be worth £200m ($400m) and it is believed that the consortium would want to buy about £1bn of new shares in Northern Rock. The bank’s market capitalisation in mid-October, around the time of the planned bid, was £1.2bn.
A group of investment banks have reportedly acquired a stake in Tradeweb, the electronic trading platform owned by Thomson in order to bolster the efficiency of the credit and derivatives markets following this summer’s markets turmoil. Goldman Sachs, Lehman Brothers, JPMorgan and Morgan Stanley would invest up to $30m each in the new venture, while Credit Suisse, UBS, RBS and Merrill Lynch would invest up to $20m.
Barclays Capital has announced a strategic commodities partnership with China Development Bank to provide Chinese companies with risk management in the energy, base metals and emissions sectors. Chinese companies’ commodities consumption has been growing due to rapid urbanisation.
China Merchant Bank has announced it aims to increase its financing of energy-efficient and environmentally friendly projects to 10% of total lending within three to five years, from the current 5%. The bank’s total lending is nearly Rmb630bn ($84bn), according to its half-year report. China Merchant Bank recently joined the United Nations Environment Programme Finance Initiative, making it the second mainland China bank to do so after Bank of Shanghai.
Morgan Stanley has received a merchant banking licence from India’s stock market regulator, allowing the US investment bank to offer advisory and underwriting services in India through a wholly owned subsidiary. Morgan Stanley, along with other competitors such as Goldman Sachs and Merrill Lynch, has had a presence in the country’s markets through joint ventures and local businessmen and is now seeking to increase autonomy and investments.
Spanish savings bank Caja Navarra has announced it will buy a stake of 30% in Hungary’s HBW Express, a co-operative lender, aiming at increasing it to 90% in 2009. The total consideration will be €40m ($56.7m). Caja Navarra plans to turn HBW Express into a bank.
Royal Bank of Canada has agreed to buy RBTT Financial Group, a Caribbean-owned banking and financial services group, for TT$13.8bn ($2.2bn). The combined operations of RBC’s Caribbean retail banking and RBTT will have 130 branches with more than 6900 employees.
Toronto-Dominion Bank (TD Bank) has agreed to buy New Jersey’s Commerce Bancorp for $8.5bn as the Canadian lender expands in the US. The deal will give TD Bank more than 2000 branches in North America and about $250bn in deposits, making it the seventh-largest bank in North America by amount of deposits, according to TD Bank.
Absolut expansion
Belgian bank KBC has announced plans to expand in Russia through Absolut Bank, a Russian lender it acquired in April this year. KBC is aiming to become a leader in retail and small and medium-sized businesses segments in the country, focusing on mortgages, credit cards and deposits in the retail division and on trade finance, working capital and term loans for the small and medium-sized corporate division.
Boutique advisory firm Perella Weinberg has announced the acquisition of Xerion Capital Partners, a New York-based investment manager that focuses on distressed credit and special situations investments. The terms of the deal were not disclosed. Perella Weinberg plans to initially invest $100m in strategies managed by Xerion’s founder, Daniel Arbress, who will join the firm as a partner. Xerion’s investment and business teams will also join the firm.
Mexico’s largest retailer, Wal-Mart de Mexico, has announced plans to launch a bank in November. Analysts expect the retailer to open between 10 and 12 branches this year. Wal-Mart de Mexico is the latest retailer in the country to diversify into banking after Grupo Elektra launched Banco Azteca in 2002, offering savings accounts and loans to its low income clients who had little or no relationship with traditional banks.
Libyan consolidation
Al Oumma Bank, Libya’s biggest state-owned bank by assets, and al Joumhouriya Bank, the fifth largest state-owned lender, have merged as part of the financial authorities’ plan to reform Libya’s banking system. The new entity will have combined assets of $65bn, a network of 143 branches and 5800 employees. The deal is expected to be completed early next year.
JPMorgan Chase has announced it will open a wholesale operation in New Zealand. The bank will not provide retail services. The number of registered banks in the country is now 17.
Dutch bank ING has reached final agreement with Athens-based Piraeus Bank on a 10-year exclusive distribution partnership in Greece covering life, employee benefits, pension insurance and retail banking products. ING will have exclusive access to Piraeus Bank’s network of 305 branches. ING will also acquire full ownership of ING Piraeus Life, a joint venture between the two banks. The partnership follows aco-operation agreement signed in 2002.
Corrections
An article on Japanese banks’ overseas business in the September issue of The Banker implied that Mizuho Corporate Bank was the second big Japanese bank to appoint a foreigner as a senior executive officer (shikko yakuin). In fact Mizuho Corporate was the first, with the appointment of Jeremy Ghose as executive officer and general manager of the bank’s Europe Corporate Finance Division in October 2005.
In October’s The Banker a table accompanying an article on Taiwan put the current foreign ownership as a percentage of the Taiwanese Stock Exchange market cap at 16.3%. It should have been 35%. We apologise for the errors.
