Financial News

  • 31 July 2013, 9:39

Chinese Banking Giant In London Trading Swoop

The Chinese bank that until recently topped the rankings as the world's biggest lender is in fresh talks to buy a major City of London commodities trading operation.

Sky News understands that Industrial & Commercial Bank of China (ICBC) has reignited discussions about acquiring the UK-based commodities and foreign exchange trading divisions of Standard Bank, the South African lender.

The talks are at a detailed stage and are expected to be concluded later this year, according to a person close to the situation.

ICBC, which notched up the biggest-ever stock market flotation in Hong Kong and Shanghai in 2006, is keen to get its hands on the businesses to cement its presence in the City and to give it greater access to vital markets for trading physical commodities.

The negotiations between state-owned ICBC and Standard Bank began late last year but were put on hold for several months during the once-a-decade handover of political power in Beijing which took place earlier this year.

However, insiders said the discussions had resumed in recent weeks with a large Chinese delegation visiting London earlier in July to continue negotiating with their South African counterparts.

The talks are focused on a similarly structured deal to the one envisaged seven months ago, with ICBC initially acquiring 60% of the Standard Bank units, and an option to increase the stake over time.

Fast-growing trade flows between Africa and China have fuelled the appetite of senior ICBC executives, who are being advised by investment bankers at Citi, to complete the deal.

If it does get finalised, it would not be the first transaction between the two sides. ICBC has owned a chunk of Standard Bank since 2007, when it bought a 20% stake for $5.5bn, and in 2011 it paid $600m for some retail banking assets in Argentina controlled by Standard Bank.

In April, the two banks agreed to lend up to 20bn rand ($2.2bn) to fund renewable energy projects in South Africa.

Insiders said that Standard Bank's desire to offload its commodities trading unit in London was not comparable to the decisions of major Wall Street banks such as JP Morgan to shift out of commodities trading for regulatory reasons.

The South African lender, which is Africa's largest bank by assets, said last year that it expected to cut up to 15% of its 900 permanent staff in London as it instead focused on its home continent.