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UBS in Talks with BOC for Holding
2005-6-24 11:18:32      China Daily
Swiss-based bank UBS said yesterday it is in talks with Bank of China (BOC) with a view to buying a stake in the nation's largest foreign exchange lender.

UBS is considering forming a mutually beneficial partnership, the bank said in a statement.

Such a partnership would include commercial co-operation in certain areas of investment banking, which are yet to be agreed, and the possibility that UBS could invest US$500 million in BOC.

UBS, which helped BOC list its Hong Kong arm in 2001, is searching for an opportunity to form a securities joint venture on the mainland.

It has already won regulatory approval to buy 49 per cent of Shenzhen-based China Dragon Fund Management Co, and has also got the go-ahead to start a financial derivatives business in China.

Meanwhile, it has permission to invest as much as US$800 million in yuan-denominated shares and bonds - the biggest quota among participants in China's Qualified Foreign Institutional Investor programme.

BOC Spokesman Wang Zhaowen confirmed yesterday that his bank is holding talks about a stake sale before IPO with a number of investors, including UBS.

Last Friday, Bank of America agreed to invest US$3 billion for a 9 per cent stake in China Construction Bank, which plans to list in Hong Kong before the end of this year.

Chinese banks pin high hopes on foreign strategic investors for their ongoing shareholding reforms, as they believe these investors can help bring in global expertise and much-needed capital.

Wang agreed strategic investors will be helpful for increasing the bank's capital strength, optimizing capital structure and to diversify ownership.

BOC, which received a US$22.5 billion capital injection from the State in late 2003, was picked by the government as a pilot for its banking reform strategy.

Last August it restructured itself into a joint-stock company named Bank of China Limited.

Wang said his bank has entered the second step of reform, which focuses on improving corporate governance.

He added the bank will finish preparations for the final IPO before the end of this year.

Last month, the bank said its operating profit rose by 21.3 per cent last year, compared to 2003, to 57.8 billion yuan (US$7 billion).

(By Su Bei)

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