BBVA sells stake in China’s Citic Bank to boost capital by €2.4bn

City A.M. Reporter
SPANISH lender BBVA yesterday agreed to sell $1.27bn (£800m) of Citic Bank shares to bolster its capital, becoming the latest foreign bank to start unwinding often difficult Chinese partnerships.

Spain’s second-biggest bank by market value is selling a 5.1 per cent stake in the Chinese lender to state-owned parent group Citic.

That will leave BBVA with 9.9 per cent, just below a regulatory threshold that would penalise it for owning shares in another bank.

Tougher global rules on banks’ capital ratios and their ownership of financial institutions have forced BBVA and others to set aside more cash and sell holdings in foreign lenders.

Several major US and European banks including Bank of America and Switzerland’s UBS have already sold out of Chinese lenders, cutting back partnerships that could be profitable on paper but were not always productive at an operational level. BBVA said yesterday it would make a cash loss of up to €120m from the Citic sale. It will also take a €2.3bn hit to 2013 earnings after reducing the value of Citic shares on its books to the market price.

BBVA said the sale would free up €2.4bn of capital under Basel III rules, which start to come in next year.