ICBC closes in on Standard Bank deal

Chinese bank near purchase of S African lender’s commodity arm

Executives from Standard Bank are in Beijing for intensive meetings with Industrial and Commercial Bank of China (ICBC) to hammer out details of a deal to sell the South African lender’s London-based commodity trading business to its biggest shareholder.

The talks have been off and on for nearly a year, but the visit to China by a large Standard Bank team signals that the two are near to closing the sale, according to two bankers familiar with the meetings.

The Standard Bank delegation is being led by David Munro, chief executive of the bank’s corporate and investment banking division. The deal to sell the trading business for up to $700m should be agreed within coming weeks, according to people familiar with the process.

Jiang Jianqing, ICBC chairman, recently told staff that completing the acquisition was a priority and that it represented a new strategic direction in the bank’s international expansion.

Chinese financial groups are showing a new-found desire to own commodities related businesses at just the time that those in other markets are losing interest. The Hong Kong Stock Exchange last year bought the London Metals Exchange, while this week, Shenzhen-based brokerage GF Securities agreed a $40m deal to buy a commodities trading business from Natixis of France.

In the US, commodities trading by banks has come under growing regulatory scrutiny and JPMorgan is exploring a sale of its business as Morgan Stanley and Barclays both cut staff.

ICBC, China’s largest bank by assets, has been the most active among its domestic peers in overseas acquisitions in recent years, buying small banks from Thailand to Argentina. These deals have all focused on expanding into new regions of the world, but the Standard Bank deal would be the first time ICBC has acquired a new product line.

With Standard Bank’s London commodity trading operations, ICBC would increase its footprint in the global trading of crude oil, copper and other raw materials. Despite China’s voracious appetite for energy and metals, its banks so far have had minimal presence in international trading markets for these commodities.

Bankers familiar with the deal talks said pricing was not a major issue. Rather, the two are trying to work out what a combined management structure would look like and how Standard Bank’s commodity traders would fit into the ICBC fold.

ICBC is Standard Bank’s biggest shareholder, having bought a 20 per cent stake in the South African bank in 2007. This investment has led to some technical co-operation between the two banks and in 2011 ICBC also bought Standard Bank’s retail arm in Argentina.

Citigroup is advising ICBC on the deal.

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