U.S. firm buys into Shenzhen bank

Newbridge Capital Ltd., a San Francisco-based buyout company, signed an agreement to buy an 18-percent stake in Shenzhen Development Bank (SDB), expanding its investment in China's banking industry after a year-long legal battle with the lender's shareholders, according to Thursday's Shenzhen Daily.

The deal would make Newbridge the biggest shareholder of the bank, one of China's six commercial banks listed on the mainland's stock exchanges.

Under the deal, four government organizations agreed to sell 348 million non-tradable shares at 3.55 yuan (US$0.4) per share, a total of 1.235 billion yuan, the Shenzhen-based bank said in a statement Tuesday.

After the sale, only one of the four organizations - Shenzhen Investment Management Co. - holds 6.13 million in shares. The other three now have none.

The agreement expands Newbridge's presence in a banking market where total lending is rising at an annual rate of about 20 percent. In March, the U.S. firm bought 4.8 percent of China Minsheng Banking Corp., the nation's biggest lender outside government control.

SDB last month reported a 40-percent increase in first-quarter profit to 214 million yuan, on revenue that gained 36 percent to 1.9 billion yuan. The lender, which has weaker bad-loan and capital-adequacy ratios than other publicly traded Chinese banks, said bad debt fell to 7.85 percent of total lending at the end of March. Its ratio of capital to risk-weighted assets was 6.96 percent, below the minimum 8 percent required by the government under international guidelines.

The Chinese Government gave Newbridge permission in September 2002 to buy as much as 15 percent of SDB, a purchase that would have made the U.S. company the first overseas investor to own a Chinese bank. In May 2003, the SDB said it had ended talks and disbanded a management committee set up to oversee the U.S. company's entry.

(Shenzhen Daily/Agencies)