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IFC, Hang Seng Bank, and GIC Special Investments Make Largest Banking Investment to Date in China’s Industrial Bank Transaction Subject to Final Regulatory Approval


In Hong Kong:
Desmond Dodd

Phone: +852 2509 8183

Email:
ddodd@ifc.org

In Beijing:

Wenqin Zhu

Phone: +8610 6505 8686 x8060

Email:
wzhu@ifc.org


All currency are in US dollars unless otherwise noted.
Beijing, Hong Kong, and Washington, DC, December 17, 2003
—The International Finance Corporation, the private sector arm of the World Bank Group, today agreed to acquire a 4.0 percent equity stake in China’s Industrial Bank’s expanded capital structure. The transaction, which is subject to approval by Chinese authorities and Industrial Bank shareholders, is part of a strategy by IFC to assist reform and restructuring of the banking sector through the introduction of private ownership. Working with other foreign partners, IFC plans to help transform Industrial Bank into “best-practice” model financial institution.  


Also agreeing to take equity stakes today are Hang Seng Bank, which would acquire 15.98 percent, and GIC Special Investments, which would take a 5.0 percent equity stake. Subject to approval, the three investors would take a combined stake of just under 25 percent in China Industrial Bank, the largest of any foreign investment in the banking sector to date.


“Our decision to invest reflects the commitment of the main shareholder–
the Fujian Provincial Government–to transform the bank into one managed along private sector lines, with increased private participation and best international practice,” said Peter Woicke, IFC executive vice president. “IFC’s participation together with an important strategic partner is expected to strengthen Industrial Bank and prepare it to attract more capital down the road.”

Under the agreement Industrial Bank would form joint ventures with its foreign investors in the development of credit card and unsecured personal loan businesses when the relevant regulations allow foreign banks to operate these businesses.


Vincent Cheng, vice chairman and chief executive of Hang Seng Bank, said, “Hang Seng Bank is very pleased to establish a strategic partnership with Industrial Bank. The signing of this agreement is an important step forward for Hang Seng Bank and significantly increases the opportunities to build our business in the Mainland, following the gradual liberalization of the Mainland financial market since China joined the WTO.”


Gao Jianping, chairman of Industrial Bank, said, “The investment by foreign partners in Industrial Bank will enhance the bank’s financial position. It is also in line with the central government’s commitment to liberalize the financial markets and strengthen the corporate governance, risk management and business development of Mainland banks through foreign investment in these banks.”


“We are honored to cooperate with the world-class Hang Seng Bank, GIC and IFC and to leverage on their experience to enhance the corporate governance of Industrial Bank,” he said.


Industrial Bank is a national joint-stock commercial bank. Presently the Fujian Provincial Government holds a 34 percent stake in Industrial Bank and is its largest shareholder. Headquartered in Fuzhou, Industrial Bank has a nationwide network of over 240 outlets. As of December 31, 2002, Industrial Bank had total assets of RMB189.66 billion ($23 billion), based on International Accounting Standards/International Financial Reporting Standards (IAS/IFRS).



Note to editors:


Industrial Bank

Established in 1988, Industrial Bank is one of the 10 national joint-stock banks in China. It is headquartered in Fuzhou and over 240 outlets nationwide. Industrial Bank had total assets of RMB189.66 billion at 31 December 2002 and net profit of RMB890.2 million in 2002, based on the International Accounting Standards/International Financial Reporting Standards (IAS/IFRS). The Bank’s non-performing loan ratio (based on the five-tier classification standard) was 3.47 percent as of December 31, 2002. Industrial Bank was ranked 273rd in the UK’s Bankers Magazine – Top 1,000 Banks of 2003.


The International Finance Corporation  

The International Finance Corporation is the private sector arm of the World Bank Group. The mission of IFC is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY03, IFC has committed more than $37 billion of its own funds and arranged $22 billion in syndications for 2,990 companies in 140 developing countries. IFC's worldwide committed portfolio as of FY03 was $16.7 billion for its own account and $6.6 billion held for participants in loan syndications.


Hang Seng Bank

Founded in 1933, Hang Seng Bank is a principal member of the HSBC Group and the second largest listed bank in Hong Kong in terms of market capitalization. It operates 155 branches and automated banking centers in Hong Kong; and a network of five branches (in Shanghai, Guangzhou, Shenzhen, Fuzhou and Nanjing), a sub-branch (in Shanghai) and two representative offices (in Beijing and Xiamen) in mainland China. The Bank also has a representative office in Taipei. With consolidated assets of HK$482.3 billion at the end of June 2003, the Bank reported a profit attributable to shareholders of HK$5.02 billion for the first half of 2003, and HK$9.92 billion in 2002. For further information on Hang Seng, please visit the Bank’s website at
www.hangseng.com.

GIC Special Investments

GIC Special Investments (GIC SI) is the private equity investment arm of GIC, a fund management company established in 1981 to manage the foreign reserves of Singapore by investing globally.  GIC SI manages an international portfolio of investments comprising venture capital and private equity funds, and direct investments.  Reflecting its global orientation, GIC SI operates out of offices in key financial centers around the world and is headquartered in Singapore.  GIC SI began investing in China in the early 90s and set up an office in Beijing in 1999.  GIC SI is now one of the most active foreign financial investors in China, with over 20 investments which include well-known companies such as CICC, China Mobile, CNOOC, Taikang, Lining etc. GIC SI's investment philosophy is to invest in successful companies and become a long term partner for these companies.  Leveraging its global network and reputation, GIC SI will provide help to its investee companies to expand their business and operation.