China Minsheng Banking Corp, which is raising up to $4 billion through a public offering of shares in Hong Kong, said on Tuesday that its failed investment in U.S. lender UCBH Holdings Inc will have a limited impact on its business.
UCBH's main unit United Commercial Bank was closed by U.S. regulators last Friday and its banking operations were acquired by East West Bancorp Inc.
Minsheng, which has invested 887 million yuan for a 9.9 percent stake in UCBH, has recognised 824 million yuan ($120 million) of losses for the investment, the Beijing-based lender said in a statement to the Shanghai Stock Exchange.
Since we have already made relatively adequate loss provisions for UCBH, we think that the closure of United Commercial Bank won't have a huge impact on our operations or profits.
The announcement comes as Minsheng, China's first privately-run lender, launches an IPO in Hong Kong this week to raise up to $4 billion to replenish capital for further expansion.
Minsheng's failed investment in UCBH underscores the risks Chinese financial institutions face in overseas acquisitions.
In October, 2007, Minsheng bought a 4.9 percent stake in California-based UCBH, which was the biggest lender in the United States serving the Chinese community, and raised its stake in the bank to 9.9 parent last December.
Minsheng had hoped that its investment in UCBH would give it access to the U.S. market and allow it to tap opportunities in growing Sino-U.S. trade.