BBVA has agreed to sell a 5.1% stake in China CITIC Bank Corporation Limited to its partner CITIC Group for about 944 million euros. The deal, carried out at market price, will bolster BBVA’s BIS III fully loaded core capital by 2.4 billion euros. Following the sale, BBVA will remain a key shareholder in CNCB, with a 9.9% stake.
BBVA’s decision to sell a 5.1% stake in CNCB will allow the Group to anticipate the new capital requirements under Basel III. The transaction will boost BBVA’s Basel III fully loaded core capital ratio by 72 basis points.
Following the sale, which is expected to close in Q4-2013 and is subject to the necessary regulatory approvals, BBVA will hold a 9.9% stake in CNCB. BBVA will receive about 944 million euros in cash in exchange for the 5.1% stake, which was sold at market price.
As part of the deal, BBVA and CNCB have agreed to review their strategic agreement in order to eliminate exclusivity obligations that affected the activities of BBVA in the People’s Republic of China as well as to discuss new areas of cooperation between both institutions. BBVA plans to open a branch office in China in the near future.
Due to the new situation, the accounting criteria applied to the participation of BBVA in CNCB changes. The investment will now be considered a non-significant financial stake, registered as “available for sale.” The change will have a one-time negative impact on the Group’s attributed net income for 2013 of approximately 2.3 billion euros, triggered by the mark-to-market of the full participation (15%) in CNCB.
BBVA remains committed to China by keeping its position as a reference partner in CNCB. China is also a key market for BBVA given its growing commercial ties with Latin America.