Citigroup intends to tighten its grip on the Chinese Shanghai Pudong Development Bank by increasing its share to 19.9%, the maximum investment cap the country allows for single foreign entities.
The deal will boost the financial services behemoth’s stake from the nearly 5% it claimed in 2003, when the China opened the to foreign investors wanting to expand into the Chinese banking market.
Pudong Development Bank announced the agreement in a statement to the Shanghai Stock Exchange, but gave no financial details, stating only that the two banks recently signed an amendment to their earlier “strategic partnership” pact, calling for Citigroup to exercise its option to boost its stake to 19.9%.
Regulations now limit a single foreign investor’s ownership to less than 20%, and combined foreign investment to 25%.
New York-based Citigroup paid 600 million yuan ($72 million at the time) in early 2003 for a 5% stake in the Shanghai bank, whose nine other top shareholders are controlled by the city government. A share issue later dwindled it to 4.62%.
The two banks launched a joint credit card in early 2004, part of the US bank’s effort to tap China’s fast-developing consumer credit market. The Chinese bank handles all transactions, and Citigroup provides technological and managerial advice.