Citigroup Sells Shanghai Pudong Development Bank Stake
03/19/2012| 07:17am US/Eastern
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--Citigroup says it has sold its entire 2.71% stake in Shanghai Pudong Development Bank
--Sale will result in an after-tax gain of about US$349 million
--Move comes after the U.S. bank recently exited its holdings in an Indian bank it bought shares in 2005
(Adds background on the sale of Citi's stake in an Indian bank in the 5th-10th paragraphs)
Citigroup Inc. (>> Citigroup Inc.) said Monday it has sold its entire 2.71% equity stake in Shanghai Pudong Development Bank (600000.SH), which will result in an after-tax gain of approximately US$349 million.
The move, which comes after it recently exited its holdings in an Indian lender for $1.9 billion, indicates Citigroup's need to set aside more capital to contain risks from potential financial stress and certain assets in accordance with global banking regulations.
The U.S. bank said in a statement it has sold the stake via block trade to institutional investors and that the total proceeds from the transaction are expected to be US$668 million at the current exchange rate.
The two banks said they have struck a new strategic arrangement where the two parties will pursue discussions in a number of areas, including utilizing Citi's global network and credit lines in support of any future international expansion plans by the Shanghai-based bank.
Last month, Citigroup sold its entire 9.85% stake in Indian mortgage lender Housing Development Finance Corp., in which it bought shares in 2005.
While Citigroup didn't give reasons for the sale, HDFC Chief Executive Keki Mistry cited tough global regulations that require lenders to keep aside more capital buffers to absorb potential financial stress as a reason.
Apart from Shanghai Pudong, Citigroup owns around 20% in midsized Chinese bank China Guangfa Bank, formerly called Guangdong Development Bank.
Under current rules, foreign banks can't hold more than 20% stake of each local bank.
That bank is planning to raise around US$4 billion to US$5 billion in a Hong Kong initial public offering sometime this year.
The IPO will mark a substantial profit for Citigroup, which led a consortium including International Business Machines Corp. and four Chinese companies to buy 85% of Guangfa Bank for US$3.06 billion in December 2006.
-Yue Li and Nisha Gopalan contributed to this article; Dow Jones Newswires; (8621) 6120 1200; yue.li@dowjones.com
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