BBVA may sell remaining 9.9% stake in China Citic after split, bankers say
Spain’s BBVA could look to sell its remaining 9.9% stake in China Citic Bank in the short-term following the termination of their strategic cooperation announced 5 June, industry bankers and analysts said.
In October 2013, BBVA sold a 5.1% stake in China Citic Bank to parent Citic Group for USD 1.3bn. It was previously reported that this stake sale could be the first step towards BBVA divesting its entire stake in China Citic Bank.
The 9.9% stake in China Citic Bank, which has a market capitalization of about HKD 244.118bn (USD 31.49bn), amounts to about USD 3bn.
Citic Group is likely to buy back the 9.9% stake in China Citic Bank, the first banker and first analyst said. The second analyst, however, said any potential transaction may take place after August, after Citic Group completes its reorganization.
The analysts said that BBVA is unlikely to maintain a sizable presence in the Asian market after its velvet divorce from China Citic Bank. BBVA is expected to maintain some operations such as wholesale and syndicate business with key customers but not big business at the branch level, they said.
“BBVA hung onto its stake in China Citic Bank because of its 2006 binding agreement and as it was not hit as hard as other European peers, there was less pressure to raise cash,” one of the analysts said. “Its exit from Citic is long overdue.”
Potential buyers
On the other hand, there could be other interested buyers for BBVA’s 9.9% stake, the first banker and analysts speculated, pointing to Alibaba, Singapore and Qatar-based sovereign funds, and China's state-owned energy and telecommunication companies as potential acquirers.
Boyu Capital’s backing of Alibaba would make the Chinese online giant a frontrunner in a potential bidding process as it could provide ample financial firepower and political support to carry out the transaction, the first banker said.
For Alibaba, building a substantial holding in China Citic Bank makes sense even though Alibaba is in the process of acquiring a new banking license, the first analyst said.
“That license is more related for distribution and asset-light businesses like distribution, remittance, consulting, and it would take Alibaba ages to build the physical network,” he said.
“[Sovereign funds] agreed to buy into Citic Pacific at 1x to book, which is to me is a huge premium,” the first analyst said. “They have clearly high confidence in future appreciation of the group assets, which are mainly made up of banking operations.”
Earlier this month, Citic Group kickstarted a listing process in Hong Kong as Citic Pacific will acquire parent company Citic Group in a CNY 227bn (HKD 281bn) deal. The new Hong Kong-listed entity will be renamed Citic Limited, as previously announced.
The first banker and the analysts noted that European and North American banks are unlikely to have the appetite to buy a stake in China Citic Bank as they are grappling with their own capital requirement issues and lack confidence in the stock market performance of Chinese banks over the next few years.
The same banker noted that Goldman Sachs sold out its stake in ICBC last year and Bank of America followed suit with China Construction Bank. HSBC, which exited Bank of Shanghai, still holds a stake in Bank of Communications, however, it is rumored to be planning to offload its shares as well.
BBVA and Citic Bank did not reply to requests seeking comment. Alibaba declined to comment. Boyu did not return calls seeking comment.