China's banking regulator has approved a 17.89 per cent stake sale in Shenzhen Development Bank to Newbridge Capital, an investment company from the United States.

In a notice published by the Shenzhen-listed bank in major securities newspapers yesterday, it said that the China Banking Regulatory Commission had recently agreed to let the bank's four existing shareholders to sell 17.89 per cent of shares they own in the bank to Newbridge, reported China Daily.

The shares to be transferred are all non-tradable State and legal person shares held by Shenzhen International Trust and Investment Co and three other State institutions.

After the transaction, Newbridge will become the biggest shareholder of Shenzhen Development Bank, another major breakthrough for foreign investors eyeing the Chinese banking industry.

It follows a recent move by HSBC, which said last month that it would pay US$1.75 billion for 19.9 per cent of the Bank of Communications, the biggest foreign investment in China's financial industry.

Newbridge's deal is still to get permission from the State-owned Assets Supervision and Administration Commission, the notice said.

Officials of Shenzhen Development Bank and Newbridge were not available for comment yesterday.

But the bank said in the notice that to protect the interests of all shareholders, it would take effective measures to control risks during the transitional period and help buying and selling parties to complete the transaction as soon as possible.

Statistics released earlier said that Newbridge would purchase altogether 348.1 million shares at a cost of 1.24 billion yuan (US$150 million).

The result seems to have put an end to Newbridge's three-year exploration seeking access to China's banking business.

It failed in a first share purchase attempt in Shenzhen Development Bank in 2002 and 2003.

As early as September 2002, authorities agreed to let Newbridge to enter Shenzhen Development Bank as a foreign strategic investor.

A special committee was then established to handle the transition, but it was dismissed in May 2003. Disputes over transaction prices and other matters between the buyer and sellers even pushed Newbridge into appealing for arbitration.

Also, the investment company once dropped out and sought another listed bank, China Minsheng Banking Corp, for a 4.82 per cent stake acquisition, in March this year.

The company finally came back to negotiations with the Shenzhen bank and managed to iron out major points of dissent with the four shareholders that were to transfer their stakes.

"Now that the banking watchdog has given policy support and the negotiations with the sellers are done, hopefully it will just be a matter time for Newbridge to complete the purchase," said Yang Liqing, an analyst with CITIC Securities Co.

Becoming the biggest shareholder in a Chinese listed bank and having control are certainly the biggest temptations for Newbridge, she said.

The entry of a foreign strategic investor is also expected to help the bank improve management and efficiency, she said.

Analysts have noted that the strength of Shenzhen Development Bank is comparatively weak in all five listed Chinese banks.

Source: China Daily