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UBS invests in Bank of China The Swiss-based bank UBS said yesterday it would invest US$500 million in Bank of China, which plans to go public sometime next year. According to a strategic co-operation agreement between UBS and the Bank of China, the two banks will become partners in various investment banking and securities business areas in China. UBS will also share its skills, experience and know-how in risk management, and asset and liability management with Bank of China. "We regard this agreement as a natural development of our long-term relationship with Bank of China," UBS Chief Executive Officer Peter Wuffli said in a statement. "The combination of the Bank of China's brand, distribution and customer base with UBS's products, services and experience will be powerful." UBS, the world's seventh largest bank and the largest wealth manager, helped Bank of China list its Hong Kong arm in 2001. Economists say this latest deal suggests that Bank of China has moved a step further towards final stock listing. The bank has already signed strategic co-operation agreements 2with the Singapore-headquartered Temasek Holdings (Private) Limited and the Royal Bank of Scotland Group respectively in August. According to the previous agreements, Temasek will spend US$3.1 billion buying a 10 per cent interest in Bank of China through its wholly-owned subsidiary Asia Financial Holdings. The Royal Bank of Scotland Group will also spend US$3.1 billion buying the same amount of stake in the Chinese bank. On August 30, Bank of China announced that it had named Bank of China International, Goldman Sachs Group and UBS as financial advisers and lead underwriters for the planned initial public offering. Domestic banks have been taking a series of measures, including the introduction of foreign strategic investors as equity owners and stock listings, to increase their competitiveness as foreign competitors will soon enter the Chinese market without restrictions. The existing regulation stipulates that foreign strategic investors combined can hold no more than 25 per cent interest of a domestic bank, while a single such investor can hold no more than a 20 per cent stake. China Construction Bank, which plans to list shares in Hong Kong next month, has already finished negotiations with strategic investors about a stake sale, following agreements with the Bank of America and Temasek. Bank of China, which received a US$22.5 billion capital injection from the government in late 2003, was one of the pilot projects for China's reform of State-owned banks. The bank reorganized itself into a joint-stock company named Bank of China Limited last August. The bank's un-audited operating profit rose 11.56 per cent during the first half of this year. By the end of June, the bank's non-performing credit rate declined to 4.38 per cent, from 5.12 per cent at the end of last year. Its capital adequacy ratio was 10.04 per cent at the end of last year.
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