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Scotiabank buys stake in Bank of Guangzhou

by Lou Whiteman  |  Published September 9, 2011 at 11:16 AM
BankofNovaScotia_227x128.jpgCanadian lender Bank of Nova Scotia said Friday, Sept. 9, it would acquire a 19.99% stake in Bank of Guangzhou for C$719 million ($735 million), expanding its presence in China ahead of the target's planned initial public offering.

Bank of Guangzhou is government-owned, but it has been seeking foreign investment -- under the 20% limit imposed by the government -- and eventually plans to list in Shanghai. The company ranks as the 29th-largest bank in mainland China, with 84 branches housing assets of C$24 billion and C$16 billion in deposits.

Toronto-based Bank of Nova Scotia, better known as Scotiabank, expects the deal to contribute to 2012 earnings and help build its business in Asia.

"With this investment we can build on Scotiabank's international presence and experience in China and combine our core strengths in wealth management, personal and commercial operations with our new partners," company CEO Rick Waugh said in a statement. "Asia is a region of strategic importance for Scotiabank, and enhancing our investment in China supports our long-term growth strategy."

The Guangzhou region has emerged as an economic gateway in south China, generating gross domestic product that trails only Shanghai and Beijing in the country.

Scotiabank, which ranks as Canada's third-largest lender, has been doing business in China for 29 years. The company also holds a 14.8% stake in Bank of Xi'an Co. Ltd. that is expected to increase to 18.1%, and has offices in Guangzhou, Chongqing, Shanghai, Hong Kong and Taipei.

The company, which has operations in about 50 countries, has been looking to expand its global reach. In September 2010 Scotiabank announced deals for the Colombian assets of Royal Bank of Scotland Group plc and the Brazilian wholesale banking unit of Commerzbank AG.

Chinese lenders have been a popular target for foreign investment, with a number of top financial institutions, such as Citigroup Inc., Bank of America Corp. and Goldman, Sachs & Co., investing in companies including Industrial and Commercial Bank of China Ltd., China Construction Bank and Shanghai Rural Commercial Bank.

Charlotte, N.C.-based Bank of America last month said it would record an after-tax gain of about $3.3 billion by selling half of its stake in China Construction.

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Tags: Bank of Guangzhou | Bank of Nova Scotia | Canada | China | M&A

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