Updated: 2005-08-18 05:48
DBS and Deutsche Bank are to purchase 10 billion shares in Guangdong Development Bank (GDB) at a price of 17.7 billion yuan (US$2.18 billion). But they will not take a controlling stake, according to a source near the top management of GDB.

The percentage of shares the two banks are going to buy and their respective offers were not known.

An insider denied rumours that GDB would sell a 51 per cent stake to a foreign investor, saying: "It is not likely to happen."

Industry watchdog, the China Banking Regulatory Commission (CBRC), has not relaxed the policy on the limit for shares held by foreign investors.

In 2003, the commission raised the limit from 15 per cent to 20 per cent for the stake a single foreign investor can hold in a domestic bank. It increased the limit further to 25 per cent for all foreign shareholders.

"Even though the commission changed the ratio limit, GDB is not likely to be chosen as a pilot bank due to its close relation with Guangdong provincial government," said the insider, who declined to be named.

"We haven't heard any news that the Guangdong government is to sell GDB."

According to China Business News, the Guangdong government plans to inject 20 billion yuan (US$2.47 billion) into GDB to strengthen its controlling stake.

The People's Bank of China, the central bank, also intends to reloan 10-20 billion yuan (US$1.23-2.47 billion) to the Guangdong bank.

After the financial reshuffling, scheduled to be completed before December, GDB is expected to have the highest capital adequacy ratio among joint-stock banks. It plans to be listed within two years.

Only US equity fund Newbridge Capital has a controlling stake in a Chinese lender, after it bought 17.9 per cent of Shenzhen Development Bank last October.