In a bid to capitalise on growing trade between Asia and Latin America, Spanish bank BBVA has raised its stake in China Citic Bank (CNCB) to 15%.
BBVA said it will pay around €1bn (US$1.5bn) or HK$6.45 (83 US cents) per Citic Bank share, to acquire an additional 4.93% of the Chinese lender.
“The region’s growth potential, coupled with BBVA’s leadership in project and trade finance and the boom in trade between Asia and Latin America, gives BBVA a considerable competitive edge in this market,” said a statement issued by the bank.
With this latest acquisition, BBVA has invested a total of approximately €3bn in the Citic group. This transaction brings BBVA’s stake in the continental Chinese entity CNCB to 15%, an investment that complements its 30% shareholding in the Hong Kong-headquartered entity Citic International Financial Holdings (CIFH), which belongs to the same Chinese industrial conglomerate, the Citic group – the biggest in China.
This move enables BBVA to be in a position to pursue the opportunities offered by the Chinese market with the highest growth potential in the world.
Key to the Spanish bank's bet on China is the growing trade between Asia and Latin American countries. Some 7.5% of Latin American exports and 17.5% of imports come from Asia, according to BBVA research. "BBVA is uniquely positioned relative to its international peers in terms of leveraging business opportunities deriving from the Asia-LatAm connection," the bank said.
Under the umbrella of the strategic agreement in force between BBVA and CITIC, last January both entities signed a series of agreements, setting the foundations for their collaboration in the retail banking arena. As a first step in this direction, in May, the parties agreed to jointly develop the car-financing and private banking businesses.
In addition to these agreements, BBVA’s Hong Kong branch has permanent relations and businesses with China Citic Bank and Citic Ka Wah Bank that involves various areas such as trade finance and cash management, an arm which provides financing to Citic’s Chinese clients for international expansion, particularly into Latin America.
Against the current economic backdrop, BBVA’s presence in Asia takes on greater significance. In marked contrast to its rivals, BBVA’s financial strength enables it not only to maintain its investments in China, but to step them up.
The collaboration with Citic also comes at a time when retail banking is registering healthy rates of growth in China.
In 2005 BBVA embarked on a strategic expansion plan in Asia, a market that represents 53% of the world’s population and 26% of global GDP.
The China strategy has materialised in an alliance with Chinese group Citic, which BBVA considers an ideal partner to accompany it on this endeavour, due to its local market knowledge.
Furthermore, the BBVA group’s leadership in Latin America, where it is present in nine countries, represents a key competitive advantage for channelling trade flows between it and Asia.
Trade flows between China and Latin America totalled US$143bn in 2008, a growth of 39% on 2007. Trade between the two regions has multiplied ten-fold since 2000.
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