The attentions of China’s Citic may not be welcome for Bear Stearns – but they are serious. The vice-chairman of the China Banking Regulatory Commission on Tuesday used the bank’s interest in Bear as an example of the ways in which Chinese companies were making inroads overseas.
So Citic’s move seems to have an official stamp of approval from one side – but political and regulatory opinion in the US is unlikely to see the matter as favourably. It’s campaign time – and cash-laden Chinese banks snapping up home-grown businesses or stake-building in Wall Street’s finest is soundbite-rich terrain.
Mergermarket reported that Bear was considering a stake sale back in mid-September, and added that interest from Asia was thought to be strong. By the end of the month, reports that Warren Buffett might be interested, along with Bank of America and Wachovia, bumped the less familiar names far down the reporting list. The addition of Buffett’s name to the rollcall was greeted with derision among some blogs, such as the Big Picture. Bear Stearns was becoming just one big rumour factory, they argued.
Real intention on the part of the Chinese of course might not be matched with solid progress. The comments from Jiang Dingzhi did not reveal any details, including the size of the stake under discussion. Chang Zhenming, former president of China Construction Bank, with whom Bear held JV talks last year, and now vice-chairman of Citic Bank’s parent group, seemed to play down the remarks saying that there had been “no concrete progress.”
The Chinese might take slight hope from China Minsheng Banking’s deal last week to take a 9.9 per cent stake in San Francisco-based UCBH Holdings – the first mainland Chinese institution to invest in a US bank.
The distance from Nasdaq-listed UCBH, which owns a bank specialising in serving Chinese-Americans, to Wall Street is vast.
But a tie-up with Citic could bring real strategic benefits to Bear, helping the bank in its attempts to increase international revenues. The opportunities created by the investment of China Development Bank in Barclays has been the comfort blanket of the UK bank in the aftermath of its defeat over ABN Amro.
Meanwhile, sitting, as we are, so close to the twentieth anniversary of Black Monday and the 1987 crash, it is time to reiterate a historical parallel noted by Lex. Twenty years ago, Bear Stearns had just struck a deal to sell 20 per cent of itself to an Asian firm, Jardine Matheson. The crash, nearly halving Bear’s stock, scared Jardine away. Fresh from its Buffett bounce, Bear is off the bottom of its latest slide and the Chinese don’t frighten easily.