Bank of America Buys Stake in China Construction Bank
Bank of America announced yesterday that it had entered into a definitive agreement with China Construction Bank (CCB), the second largest commercial bank in China, to purchase 9 percent of CCB's stock for $3 billion and obtained an option to increase its stake up to 19.9 percent in the future. As part of the deal, it looks like Bank of America has secured its retail banking and payment card partner for China.
As part of the transaction, CCB and Bank of America have entered into separate agreements for Bank of America to provide strategic assistance to CCB in the areas of corporate governance, risk management, IT, financial management, human resource management, retail banking (including credit card), and global treasury services.With the Bank of America partnership, CCB becomes the first of China's "Big Four" banks to reach an agreement with a foreign strategic investor. The transaction represents the single largest foreign investment in a Chinese company to date.As part of this strategic assistance program, Bank of America will provide approximately 50 personnel to advise CCB in these key areas. Bank of America will also have a seat on CCB's board of directors.
Last month CCB became the first commercial bank in China to win MasterCard's Asia-Pacific Best Innovation prize for MasterCard Debit Cards. CCB also was awarded MasterCard's Greater-China Best MasterCard Debit Card 2004.
“This investment is aimed at creating a long-term benefit by partnering with the best positioned bank in China, which is one of the fastest growing economies in the world with 1.3 billion consumers,” said Kenneth D. Lewis, Bank of America chairman and chief executive officer.“CCB has undergone an impressive transformation in the last several years. They have built a leading franchise in China, and we see value in combining their local knowledge and distribution with our product expertise, technology and experience with size and scale. Under our agreement, we will offer CCB the benefit of our experience in such areas as governance, risk management, credit cards, consumer banking and treasury services.”
Guo Shuqing, Chairman of China Construction Bank, said, “We are very pleased to have Bank of America, one of the world’s largest, most successful and respected financial institutions, as our strategic partner. I firmly believe this is a win-win partnership. The most fundamental and challenging task in transforming CCB is to establish a culture that is customer centric and market driven. Our goal is to provide the best service to our customers. We have much to learn from our partner in serving customers and creating shareholder value. This is the core of our comprehensive cooperation.”
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