An investment arm of Citigroup Inc and Singapore's DBS are among the remaining would-be buyers of China's struggling Guangdong Development Bank after surviving the first round of bidding, two banking sources close to the deal said.
The Citigroup unit, Singapore's largest bank DBS Group Holdings Ltd, and China's number-two life insurer Ping An Insurance were among those still in the hunt after as 20 firms took part in the first phase over the past week, they told Reuters.
Regarded by analysts as one of the country's weakest commercial lenders, Guangdong Bank is attracting foreign and domestic investor attention partly because of its location and market share in affluent southern China.
Apart from Citigroup, DBS and Guangdong Province-based Ping An, three to four others also advanced, while Dalian Shide Group - a state-run industrial group - was among those to drop out, the sources said.
They gave no further details on the firms involved in the bidding process. "It's still too early to say who would have the last laugh," said a senior executive at Guangdong Bank who is involved in the talks told Reuters.
Citigroup and DBS both declined to comment. Guangdong Bank intends to launch a second round of bidding soon, and could pick several foreign and domestic investors in November at the earliest, the executive said.
NEEDY SECTOR Earlier this year, Citigroup's investment banking team tried to persuade Guangdong Bank to hire it as a financial adviser, with an eye to underwriting the bank's long-planned overseas initial public offering, according to another banking executive, based in Beijing, who was close to the negotiations.
But BOC International and Deutsche Bank were hired instead, the executive said.
"Now, it's the investment unit of Citigroup, rather than the core banking unit, that is in talks with Guangdong Bank," the executive added, explaining that the investment unit probably would not be a long-term strategic investor in terms of business co-operation.
A team of DBS executives held a closed-door meeting on Thursday in Guangdong Bank's head office in Guangzhou with Guangdong Bank President Zhang Guanghua and his team, hoping to push negotiations further, the two sources said.
Beijing is eager to entice foreign cash and expertise into its banking sector, which is saddled with $200 billion in bad debt. That effort has lured billions of dollars in investment from banks such as HSBC Holdings Plc. and Bank of America.
For their part, foreign players are scrambling to stake out a foothold in a market with more than $1.5 trillion in savings, ahead of nearly full liberalisation at the end of 2006.
Industry sources have said DBS planned to buy about 20 percent of Guangdong Bank, and hoped to seal the deal before the end of the year. Financial details were unknown because much depends on the outcome of an audit by KPMG.
The Guangdong Bank executive said KPMG had finished the audit only recently and that potential investors were studying the results.
"The numbers are getting worse," he said. According to its 2003 annual report, Guangdong Bank had a non-performing loan ratio of 22.84 percent at the end of 2003, double the industry average of slightly more than 10 percent.
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