Citigroup Aggressively Woos China Construction
Bank For Underwriting Business
Citigroup has aggressively wooed China Construction Bank
to become an underwriter for its IPO in New York, and
according to many Chinese sources, it has paid off with
favorable press in China.
China Construction Bank is one the two
banks recently recapitalized by the Chinese government
at the end of 2003. Since both are state-owned banks and
held a large amount of bad loans made to other state-owned
enterprises, their health, until the recent government
moves, was poor. The Chinese government, in a move to
bring at least two major banks to IPOs on international
markets, has helped to improve their financial health.
The driving incentive for the Chinese government is that
under WTO regulations, the China domestic market will
be opened to non-Chinese banks on Dec. 1, 2006, and the
government wants to have at least two healthy Chinese
banks which can compete with their much healthier western
rivals.
China Construction Bank hopes to raise US$5 billion from
its overseas listing, and it is estimated that the underwriters
will make US$175 million in fees. For this reason, the
competition to get the business has been intense. The
banks left in the competition to get the business are
Morgan Stanley, Citigroup and Deutsche Bank. In order
to win the business, they have brought out their major
players including Henry Kissinger for Morgan Stanley,
and Chancellor Gerhard Schroeder of Germany for Deutsche
Bank.
Citigroup made an even bigger move. For a special conference
called "Business Banking and Risk Management",
held in Wuhan on Jan. 8, they brought Robert Rubin, former
US treasury secretary under President Clinton. Before
becoming treasury secretary in 1995, Rubin was co-CEO
of Goldman Sachs. Currently, Rubin is chairman of the
executive committee of Citigroup. In addition, they brought
out Stanley Fischer, who is president of Citigroup's international
group to meet China Construction Bank's management, as
well as the Chinese government leadership.
Citigroup said that it was interested in becoming a shareholder
in China Construction Bank, and would work to resolve
any conflict of interests. The major conflict of interest,
as the Chinese see it, is that Citigroup has a strong
retail arm, Citibank, which plans to enter the Chinese
market directly in 2006.
Whatever the final decision is, the Chinese were impressed
with Citigroup's aggressiveness to win new business.
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