State-owned China Development Bank, which does the bidding of
Beijing, and Barclays PLC will team up in a wide-ranging deal under
which the British lender will offer services to the Chinese bank
around the world.
Stock and bond sales, foreign-exchange trading, day-to-day
commercial banking and staff training are among the areas covered
by the agreement--as is helping CDB buy overseas assets. Barclays
is strong in Europe, the U.S. and most significantly in Africa,
where Chinese state-backed companies have been ramping up as part
of government-backed push to secure resources, particularly energy
and minerals.
"We will show them ideas, targets and also financing structures
so that CDB will be able to buy the target," said Philip Tsao,
managing director and head of global finance and risk solutions for
Greater China at Barclays. "It is for Barclays and CDB a pretty
significant step forward."
CDB began more than two decades ago as one of three "policy
lenders' that provided funds to state companies whose actions were
aligned with government policy. With Barclays as a partner, CDB's
overseas reach comes full circle. Its first international move away
from lending to state-owned firms came with its 2007 acquisition of
a 3.1% stake in Barclays, to finance the U.K. bank's ultimately
unsuccessful bid for ABN Amro Holding. That stake has been diluted
over the years and is now just over 1%.
The new agreement, known as a memorandum of understanding,
replaces pacts the two have signed since 2007.
At one time, CDB did most of its business inside China and
occasionally financed natural-resources deals for Chinese
companies, but it made a big splash when it lent money to
e-commerce company Alibaba Group and to fund the Hong Kong
Exchanges & Clearing Ltd.'s purchase of the London Metal
Exchange in 2012.
It recently pulled back from those types of deals.
Africa could be a key element of the pairing's strategy. CDB has
been a major lender to Chinese firms setting up mines and building
infrastructure projects across the continent, and it runs a
private-equity fund aimed at supporting local small and midsize
businesses there. Barclays Africa is one of the continent's largest
financial institutions, with operations in South Africa, Botswana,
Ghana, Kenya, Mauritius, Seychelles, Tanzania, Uganda and Zambia
and plans to further develop the business.
"We have hired Mandarin speakers in Africa to serve our clients
from China, including CDB," Mr. Tsao said. "We will offer a lot of
training to their staff in Africa."
It is a road pioneered by Industrial & Commercial Bank of
China Ltd. and South African lender Standard Bank Group Ltd.,
Africa's largest homegrown bank by assets. In 2007 ICBC paid $5.5
billion for a 20% stake in the South African lender, a deal seen at
the time as a way to open up Africa to the Chinese bank. ICBC later
bought 80% of Standard Bank's operations in Argentina for $600
million, and earlier this year added 60% of Standard Bank's
commodities- and foreign- exchange-trading business in London for
an estimated $765 million.
CDB hasn't demonstrated the kind of international ambition that
has led ICBC to buy banks in North America, Thailand and Indonesia
and set up dozens of branches globally. CDB has a limited permanent
presence overseas, with offices in Cairo and Moscow, according to
the bank's website.
CDB has signed agreements such as MOUs before, sometimes with
little significant outcome. In recent years Nomura Holdings signed
a pact with CDB Securities, while CDB International Holdings signed
agreements with private-equity firm Kohlberg Kravis Roberts and TPG
Inc. to pursue co-investing opportunities.
At the end of 2012, Barclays Africa--then known as Absa
Group--moved to bolster its China business when it hired as its
chief executive of retail and business banking the man in charge of
Standard Bank's China operations in Beijing, Craig Bond. Mr. Bond
had been in charge of shepherding the South African bank's
relationship with ICBC.
Standard Bank and CDB have long had a close relationship. In
2012 Standard Bank acted as the sole bookrunner of CDB's 500
million yuan ($80.6 million) sale of bonds to African central
banks, and the Chinese bank has also provided financing for
Standard Bank's lending program for small businesses in South
Africa. The two banks also occupy the same office building in
Beijing--across the road from ICBC. But ICBC's partnership
constrains CDB's scope to cooperate with Standard Bank on
deals.
As of the end of 2013, CDB's total foreign-currency loans had
reached $292 billion and its total assets were valued at more than
eight trillion yuan ($1.3 trillion), according to its website.
Write to Enda Curran at enda.curran@wsj.com and Dinny McMahon at
dinny.mcmahon@wsj.com
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