China's CITIC Bank Corp Ltd is bidding for a stake in Bear Stearns Cos, a senior Chinese regulator said, in the first official confirmation of media reports that the state-run bank was a potential suitor for the smallest of Wall Street's five big independent brokerages.
Bear Stearns is among the institutions hardest hit by the U.S. subprime mortgage crisis, and Chief Executive James Cayne said earlier this month it would consider selling a stake to an investor from China or the Middle East if the deal created value.
Jiang Dingzhi, vice-chairman of the China Banking Regulatory Commission, on Tuesday cited CITIC Bank's interest in buying into Bear Stearns as he listed Chinese banks' acquisitions and investments in overseas financial institutions.
The foreign M&A of our banks is entering a new era and the pace of internationalization is accelerating, Jiang said at a financial forum during the five-yearly Congress of the ruling Communist Party.
Asked later about talks on a potential investment in Bear Stearns, Chang Zhenming, general manager of parent CITIC Group, told reporters: There is no substantial progress.
A spokeswoman in Tokyo for Bear Stearns was not immediately available for comment.
Bear Stearns shares have fallen more than 10 percent since a credit crunch hit global markets in the summer, cutting the Wall St firm's market value to $14.2 billion.
There has been speculation that the firm, battered by two collapsed hedge funds and losses at its flagship mortgage business, needed a cash infusion.
A regulatory filing last month revealed reclusive billionaire Joseph C. Lewis had taken a 7 percent stake.
Other potential Bear Stearns investors cited in media reports include Bank of America Corp, Wachovia Corp, China Construction Bank and billionaire investor Warren Buffett.
Bear Stearns has been looking to expand its overseas focus, and a tie-up with CITIC, China's seventh-largest lender, could give it a big boost in the world's fourth-biggest economy.
CITIC Bank raised $5.4 billion in a Hong Kong and Shanghai initial public offering in April.
China's big banks, flush with cash after a spate of multibillion-dollar IPOs, have been looking to deploy some of that capital overseas -- reversing a flow that has seen Bank of America, Royal Bank of Scotland and others make big investments in Chinese lenders.
CLSA analyst Dominic Chan said Chinese banks have plenty of opportunity for growth at home, but if they find attractively priced overseas assets then it's worth taking a look.
I think CITIC has its own story to tell in China. I'm not quite sure they really need to make such a move so soon after the listing, he said.
If Bear Stearns is trading below book, it's clearly worth looking at, Chan said.
Shares in Bear Stearns have dropped more than a quarter this year and trade at 1.18 times book value.
CITIC Bank's Hong Kong shares have risen 8 percent since their April listing, underperforming many of the year's debutants from China. The stock trades at about 2.4 times book. Its Hong Kong shares were up 0.5 percent at HK$6.23 on Tuesday.
Apart from CITIC, Jiang mentioned in his remarks:
-- Industrial & Commercial Bank of China bought 90 percent of PT Bank Halim Indonesia last December.
-- Bank of China paid $965 million last December for Singapore Aircraft Leasing Enterprise Pte Ltd.
-- In July, China Development Bank, which lends at the direction of the government, bought a 3.1 percent stake in Barclays Plc for 2.2 billion euros ($3.1 billion).
-- China Minsheng Banking Corp said this month it will buy 9.9 percent of San Francisco-based UCBH Holdings for more than $200 million in the first investment by a mainland Chinese commercial bank in a U.S. bank.
(Additional reporting by Jerry Hua)