HSBC target plans flotation next year

CHINA's Bank of Communications, in which HSBC plans to take a stake of up to 20%, may list shares overseas next year, an official Beijing newspaper says.

HSBC says it is in talks to buy 19.9% of the Chinese bank, the country's fourth-largest lender. The official China Securities Journal said that attracting investment from HSBC was only one facet of a wider restructuring.

'After it has landed a foreign shareholder and admitted them into the board of directors, the bank's listing plan will be adjusted accordingly,' the newspaper said, citing an official at the China Banking Regulatory Commission.

'The plan has changed to Bank of Communications listing overseas early next year,' it reported.

Earlier reports suggested the bank could float this year as part of efforts to raise its capital adequacy ratio to more than 10% from about 8% currently.

HSBC has spent months courting the Shanghai-based lender during an aggressive expansion into the Chinese market that has seen it pick up sizeable stakes in the Bank of Shanghai and China's number-two life insurer, Ping An Insurance.

The stake in the Shanghai-based Bank of Communications is worth about $1.5bn (£820m). China is one of the fastest growing banking markets in the world and with some £700bn in savings.

The State-run Communications bank's main shareholder is the powerful Ministry of Finance. The Chinese government is pushing the banks, mired in more than £100bn in bad debts, to repair their balance sheets with foreign capital, and has significantly liberalised ownership provisions.

Foreign investors can now own up 25% of a Chinese bank, with the cap on a single overseas owner at 20%.

HSBC's major competitors Citigroup and the International Finance Corp are among the foreign institutions that have bought slices of domestic lenders. Others, such as US private equity fund Newbridge Capital, have either agreed deals or are in talks to do so.

Another of HSBC's rivals, Standard Chartered, says it is also in talks with one or two potential partners, and is reportedly close to buying a stake of at least 15% in China Everbright Bank.