Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:
Citigroup May Be Near A Chinese Bank Deal [Wall Street Journal]
Summary: Citigroup has been in a year long bidding war with France's Société Générale SA and China's Ping An Insurance, with the three of them separately seeking to win a stake in China's Guangdong Development Bank. According to a person close to the matter and state media reports, Citi appears to be in position to win. The deal would be worth about $3 billion for a stake approaching 25%, or under the maximum allowable by foreign banks and investors under Chinese law. In order to comply, Citi is making its bid with a subsidiary, so as not to exceed 20% ownership by a single foreign bank, but still be under 25% control. In the end, Citi, and a group of Chinese investors it is working with would have an 85% ownership position. Guangdong DB has $48 billion in assets with nearly 600 branches and a national license, but is "financially weak." By the end of this year China must open its banking sector -- estimated $1.9 trillion equivalent of yuan deposits -- to foreign competition as part of its 2001 WTO accession promise.
Related links: Citigroup Q3 2006 Earnings Call Transcript • BofA, Citi Trade Lower after Q3 Earnings • China's Banking Sector Looks Better with New Corporate Bankruptcy Law • Developments in China's Banking Sector
Potentially impacted stocks and ETFs: Citigroup (NYSE:C), Société Générale (OTCPK:SCGLY) • ETFs: First Trust Morningstar Div Leaders Idx (NYSEARCA:FDL), WisdomTree High-Yielding Equity (NYSEARCA:DHS), streetTRACKS KBW Bank ETF (NYSEARCA:KBE), Vanguard Financials ETF (NYSEARCA:VFH)
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