China Mobile to take $6b bank stake: report

Robert Clark
01 Mar 2010

China Mobile is plotting to buy 20% of a Chinese bank for as much as 40 billion yuan ($5.9b), according to Chinese brokers.

The Shanghai Pudong Development Bank is preparing to sell 2.2 billion shares to China Mobile at 17.82 yuan per share, Guotai Junan Securities said last Thursday.

The mid-sized bank, set up two decades ago to help fund the development of Shanghai, is 3.8% owned by US bank Citigroup.

Another brokerage, China International Capital Corp, also reported the deal in an email to clients on Thursday, and Reuters reported.

Pudong’s shares on the Shanghai exchange have been suspended since Thursday, when it said a major announcement was pending. Neither company has commented since the breaking of the news, which has prompted speculation and head-scratching.

Michael Clendenin, from RedTech Advisors (China) said China Mobile might be trying to buy some legitimacy for its RF-SIM mobile payment system, which he believed had met with a cool reception from Chinese banks.

Financial Times columnist Lex said the investment seemed “bizarre”.

It was not unusual for Chinese firms to invest in banks, “[b]ut what could it do with a fifth of the shares that it couldn’t do with the customary commitment of 1% or 2%?”

Additionally, Pudong Bank had just 491 outlets nationwide compared with ICBC’s 16,000.

However, as an investment it made sense. Pudong needed to strengthen its capital base, and China Mobile, facing stiffer competition, “needs returns wherever it can find them.”

China Mobile’s stock rose 0.53% to $49.43 in Friday trading on the NYSE, and up 0.85% to HK$77.25 on the Hong Kong Stock Exchange this morning.

Related content

No Comments Yet! Be the first to share what you think!
This website uses cookies
This provides customers with a personalized experience and increases the efficiency of visiting the site, allowing us to provide the most efficient service. By using the website and accepting the terms of the policy, you consent to the use of cookies in accordance with the terms of this policy.