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BOA to buy into China Construction Bank
By Brian Kelleher, Daisy Ku and Victoria Bi HONG KONG/SHANGHAI (Reuters) - Bank of America Corp., the
second-biggest U.S. lender, said it would pay $3 billion for a 9 percent stake in China Construction Bank in the largest single foreign
investment in China's banking sector. Bank of America wants to expand beyond its home market where it has a 10 percent maximum share of deposits. Construction Bank, one of China's Big Four state banks and the country's top property lender, is eager to sign up a foreign investor ahead of a planned $5 billion IPO later this year. The U.S. bank has the option to increase its holding in Construction Bank over the next five and a half years to 19.9 percent, the maximum allowed under Chinese law. Citigroup Inc., the world's biggest bank, was seen as the front-runner to invest in Construction Bank, but sources said its offer fell short. Chinese state banks are seeking foreign
investment to bring credibility and know-how to an industry tarnished by the legacy of decades of government-directed lending to bloated state firms. In late 2003, Beijing gave Construction Bank a $22.5 billion bailout, part of a vast effort to revamp a creaky financial system that is regarded as a threat to China's growth. "CCB has undergone an impressive transformation in the last several years," said Bank of America Chief Executive Ken Lewis. China's allure is $1.5 trillon in personal savings and a culture that is only beginning to embrace credit. Few Chinese have a
mortgage or credit card, but nearly double-digit economic growth has created an expanding class of borrowers. "Most foreign banks in China would want a piece of the retail action," said ABN AMRO analyst Simon Ho, who said the deal was not expensive for Bank of America, which posted net income of $4.7 billion in its first quarter alone. SIZE, SKILLS Construction Bank, considered the healthiest of China's Big Four, has $472 billion in assets and 14,500 branches. Bank of America, with a market value of $187 billion, has $1.2 trillion in assets and 5,800 U.S. branches. Continued ...
Source: reuters.com