Summary: Goldman Sachs (GS) is set to make a killing off its $2.58 billion, 5.75% stake in Industrial & Commercial Bank of China. ICBC's IPO is next month in Hong Kong and Shanghai and given current demand Goldman could see its investment double. However, it won't be able to cash out for three years and missed out in underwriting fees that could have been as much as $70 million. Nevertheless, investing in China's banks has been lucrative for overseas investors. Overall, Goldman has enjoyed success in China as it has in Japan for instance, especially from its investment in Sumitomo Mitsui Financial Group that gave Goldman access to its clients. ICBC by the way has 2.5 million corporate customers. However, some analysts warn of the unproven track record of Chinese banks, and point out their comparatively high nonperforming loan rates.
Related links: Full WSJ article • BusinessWeek: China's ICBC: The World's Largest IPO Ever • Goldman Sets the Standard This Investment Banking Season • Goldman's Exclusive Hedge Fund Drops By 10% - A Harbinger of Things to Come? • UBS To Benefit from Chinese Banking Restrictions • Conference call transcripts: Goldman Sachs F3Q06
Potentially impacted stocks and ETFs: American Express (AXP), Bank of America (BAC), Merrill Lynch (MER), Morgan Stanley (MS) and UBS AG (UBS) also have investments in Chinese banks.
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