Goldman Sachs is selling an up to $1.54 billion stake in China's ICBC, the Wall Street firm's third sell down of its stake in the world's largest bank by value, as Goldman seeks to trim exposure in the investment, held since 2006.
Steep losses in investment securities caused Goldman to post its second quarterly drop as a public company less than a month ago, booking a $1.05 billion paper loss on its ICBC stake alone.
Foreign banks selling shares in China's banks is a sensitive issue in Beijing, which has not taken the sell-downs lightly since they began in 2009. Bank of America, RBS and UBS are among the foreign banks that have sold large stakes in Chinese banks over the past few years.
Goldman made a point around the time of its 2010 lock up expiry to express its commitment to ICBC. Goldman's latest sell down came with ICBC's support, and the New York bank told the Chinese lender the transaction was coming, according to a source familiar with the matter.
Sources familiar with matter told Reuters on Wednesday that Goldman was selling 2.4 billion shares, or 2.8 percent of ICBC's Hong Kong listed stock. ICBC, officially known as Industrial and Commercial Bank of China Ltd., is one of China's Big Four state-backed banks. All four banks were technically insolvent roughly five years ago, crippled by bad loans built up over many years.
Goldman invested in ICBC before ICBC's 2006 dual listing in Hong Kong and Shanghai. China's Big Four are now among the largest banks in the world by market value.
IFR, a Thomson Reuters publication, was first to report the sale, which comes at a time when ICBC shares have recovered about 50 percent from October lows.
A source said Goldman was executing the sale to reduce its market exposure to the stake. The Wall Street bank notified the Chinese bank about the impending sale, another source said.
"It's likely a reflection of Goldman's own desire to book some profit and hedge their risk rather than a negative view on Chinese banks," said Warren Blight, lead analyst for Chinese bank research at Keefe, Bruyette & Woods in Hong Kong.
The sale also comes at a time when several European and U.S. banks are under pressure to raise capital. In August, Bank of America Corp sold a $8.3 billion stake in China Construction Bank and a media a report this week said BofA was considering cutting the stake further.
Goldman first bought 4.9 percent of ICBC for about $2.6 billion before the 2006 IPO, which was then the world's biggest public offering.
Goldman has raised a total of $5.9 billion through its three sell downs and its stake, still worth around $5 billion after the sell down, is worth twice the original investment.
Goldman is offering the shares in a range of HK$4.88-5.00 each, a discount of between 3.7 and 6 percent to the last traded price, a term sheet seen by IFR showed.
ICBC President Yang Kaisheng said that he respects Goldman Sachs decision to sell the stake. .
"Goldman Sachs has told us that they still recognize the investment value of ICBC (shares)," Yang said.
Goldman Sachs is the sole book runner for the deal. The bank declined to comment on the transaction.
© 2022 Thomson/Reuters. All rights reserved.