HONG KONG -- As Industrial & Commercial Bank of China Ltd. posted a 36% rise in 2008 net profit, two foreign investors took steps to sell part or all of their stakes in the bank, the world's largest by market value.
ICBC struck an agreement with Goldman Sachs Group Inc. that paves the way for a possible sale by the U.S. bank of part of its 4.9% stake in the Chinese lender, a holding currently valued around $7.6 billion.
And American Express Co., which owns 0.4% of ICBC, said it is considering selling its stake when the lockups on its shares expire in April and October. The two companies also reaffirmed their cooperative relationship, under which ICBC issues AmEx cards.
For Goldman's part, while the New York bank on Wednesday committed to keeping 80% of its investment in government-controlled ICBC until April 2010 under the new arrangement, it will be free to sell the remaining 20% after April 28.
"This arrangement gives us the flexibility to reduce the size of our investment, when we choose to do so," said a Goldman spokesman.
The Wall Street Journal reported Tuesday that Goldman was in talks with ICBC to sell 15% to 20% of its stake in the Chinese bank, and that Goldman would also likely offer to lock up the rest of its stake for a further 12 months.
Still, such sales are a sensitive issue in China, where many people have criticized the foreign investment deals in those banks, saying the stakes were sold at too low a price.
Foreign executives have indicated that the motive for the stake sales has less to do with a lack of confidence in the Chinese banks than the need to shore up capital at home.
In recent months, several foreign banks have sold stakes in Chinese banks to raise cash amid the global financial crisis. The banks include Bank of America Corp., which sold part of its stake in China Construction Bank Corp., and Royal Bank of Scotland Group PLC and UBS AG, which both sold their entire stakes in Bank of China Ltd.
Goldman's stake in ICBC is valued at nearly three times what it paid in April 2006, before ICBC's $21.9 billion dual listing in Hong Kong and Shanghai in October of that year.
Goldman Vice Chairman J. Michael Evans, who was in Hong Kong for ICBC's earnings announcement Wednesday, emphasized that the U.S. investment bank has "great confidence in China's economy and in ICBC's management."
He said Goldman is "in no hurry to sell as we don't need the cash."
Mr. Evans said Goldman would carry out any potential sale through a private placement. He added: "We haven't contacted any investors relating to the 20% stake sale. And we have made no decision on the structure and the timeframe of any potential sale."
In a joint statement, Goldman and ICBC "reaffirmed that they will continue their collaborative efforts" under their 2006 deal in areas like sharing risk-management expertise.
ICBC said full-year net profit rose to 110.84 billion yuan ($16.2 billion) from 81.52 billion yuan in 2007. But in a sign of worsening business conditions for Chinese banks, a calculation indicated that ICBC's net profit rose less than 1% in the final quarter of the year to 18.11 billion yuan from 18.02 billion yuan a year earlier, in contrast to the 77% jump in ICBC's first-quarter net profit and the 46% increase in the January-September period.
ICBC said: "We are well aware that the bank will face severe challenges in 2009."
ICBC said it set aside $1.917 billion to cover potential investment losses in the U.S., but its exposure is a fraction of the bank's total assets, leaving it relatively unscathed by the subprime crisis that has plagued its Western peers. The bank said that as of Dec. 31, it held $1.195 billion of U.S. subprime residential mortgage-backed securities.
Bank of China, which has the biggest investment in U.S. subprime securities of all Asian financial institutions at $2.59 billion, said Tuesday that its 2008 net profit rose 14%, though a calculation indicated its earnings fell 59% in the final quarter.
