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ICBC's Jiang Confirms Talks to Buy Stake in ACL Bank

By Eugene Tang and Luo Jun

April 8 (Bloomberg) -- Industrial & Commercial Bank of China Ltd., the world's biggest by market value, said it's in talks to buy a stake in Thailand's ACL Bank Pcl, a deal that would add to emerging-market holdings in South Africa and Indonesia.

``We have been in discussions on investing in ACL,'' ICBC Chairman Jiang Jianqing said in an interview in Beijing yesterday. ``We are waiting for details on the ownership level. Our M&A strategy in smaller banks is to seek control and management.''

Bangkok Bank said Nov. 21 it aimed to complete the sale of a 19.3 percent stake in ACL, worth $33 million at yesterday's close, to ICBC by the end of 2007. The deal was delayed awaiting a plan to raise overseas ownership limits in Thai banks to 49 percent. Thailand's government holds 30.6 percent of ACL.

Jiang, whose bank has more customers than Russia has people and enough cash to buy Citigroup Inc., has focused on emerging markets as he tries to triple the share of profit coming from overseas, to 10 percent. Thailand's government last month raised its forecast for economic growth this year, even as the U.S. economy edges closer to a recession.

A law raising the maximum foreign ownership limit in Thai banks from 24 percent took effect in February, according to the central bank's Web site. ACL Bank was little changed today at 5 baht at 1:28 p.m. in Bangkok.

`No Secret'

ICBC has announced acquisitions in Indonesia, South Africa and Macau in the past year. It was among possible bidders for a majority stake in stake in Hong Kong's family-controlled Wing Lung Bank, two people familiar with the matter said last month. Jiang declined to comment on what he called ``rumors'' of an acquisition of Wing Lung.

The implosion of the subprime mortgage market triggered more than $230 billion of losses at banks and securities firms, forcing Citigroup Inc., Merrill Lynch & Co. and Morgan Stanley to seek outside capital and fueling speculation that Chinese banks, whose profits jumped an average 70 percent last year, would make acquisitions in the U.S. and Europe as valuations tumbled.

``ICBC and big sister banks made it no secret that they want to expand offshore to diversify and pick up new skills,'' said Warren Blight, a Hong Kong-based analyst at Fox-Pitt Kelton Asia Ltd. ``Valuations all over the world have dropped so this is probably a good time to make acquisitions.''

China Merchants Bank Co, China Construction Bank Corp. and Bank of Communications Ltd. last month said they're interested in buying assets overseas.

At $289 billion, ICBC's market value is more than double that of Citigroup's $128 billion. The Chinese bank has $136 billion of cash and near-cash securities.

Expansion Spree

Jiang predicted U.S. financial market turmoil has further to go and said he isn't in a rush to buy assets there.

``The U.S. subprime risk isn't over,'' he said. ``Even though asset prices are very low and many good assets can be bought, we just don't know where the bottom is.''

Chinese banks and insurers, buoyed by rising profits and cash from stock sales, have bought $9.9 billion of overseas financial assets in the past year, according to data compiled by Bloomberg.

State-owned ICBC's overseas expansion began in December 2006 with the purchase of 90 percent of PT Bank Halim Indonesia for 90 billion rupiah ($10 million). On Aug. 29, the Chinese firm agreed to buy 79.9 percent of Macau's third-biggest bank for almost 4.7 billion patacas ($586 million). In October, the bank bought a fifth of South Africa's Standard Bank Group Ltd. in the largest overseas acquisition by a Chinese bank.

Thailand's Finance Ministry owns 30.6 percent of Bangkok- based ACL Bank, according to the bank's 2006 annual report, the latest available. ACL Bank's profit dropped 55 percent last year to 343 million baht ($10.8 million).

ACL Bank expects its loan portfolio to grow 55 percent to 51 billion baht this year, the Thai-language Krungthep Turakij newspaper reported Feb. 19, citing President Thongchai Ananthothai.

---Bloomberg

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