May 19,2009

Bullish GS Announces No Reduction in Its ICBC Shares, Again

By CSC staff, Shanghai

Goldman Sachs (GS) Vice-Chairman Michael Evans, also Chairman of Goldman Sachs Asia, announced in Shanghai that GS would not be reducing its stake in ICBC.

Attending the Lujiazui Forum in Shanghai, Evans, in response to a reporter’s question on whether GS planned to sell off any of its ICBC shares, answered simply, "No."

In April, a portion of the shares owned by ICBC’s three foreign strategic investors, GS, Allianz, and American Express, became tradable, and Allianz and American Express sold all of these shares. But GS announced at the ICBC performance conference at the end of March that it would extend the lock-year period of 80% of its ICBC shares.

At present, GS holds 16.4762 billion shares, 3.2952 billion of which became tradable this year on April 28, the remaining 13.181 billion shares becoming tradable on April 28, 2010.

It seems that GS is not in the company of other western banks lacking ready cash, for instance Bank of America (BoA), which, under pressure from US regulators to increase its capital base, recently sold off a bunch of its shares in China Construction Bank (CCB). Although GS took $10 billion from the US government’s asset relief program in October, 2008, Evans made it clear in March that the firm’s capital and liquidity are in good shape and there was no need to sell its ICBC shares
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As for foreign banks reducing their stakes in Chinese banks, analysts believe that this is mainly due to those banks?own problems rather than any loss of confidence in China's banking sector. The 13.5 billion CCB H-shares put on the market by BoA less than a week ago were quickly gobbled up in a private deal by GS-led Hopu Fund and Singapore?sovereign wealth fund Temasek, along with Chinese partners such as China Life and BOCI Asia Limited.  

Against the backdrop of global financial turmoil, the performance of China's banking sector shines. According to the China Banking Regulatory Commission, in 2008 China's banking sector achieved an after-tax net profit of 583.4 billion yuan, up 30.6% over 2007. Indicators such as total profit, profit growth and return on capital all ranked the global first.

Singapore’s Temasek is similarly bullish with GS about China’s banks, not merely resisting any reduction in holdings but actively adding to its stash.

 

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