Spanish bank BBVA has sold a 5.1 per cent stake of Chinese banking group CITIC Bank Corporation Limited (CNCB) to parent company CITIC Group for 944 million euros.
As part of the transaction, BBVA is marking its 15% stake at market prices. It will take a €2.3bn charge after reducing its stake to free up capital. By reducing the stake below 10%, BBVA avoids stricter Basel III capital rules for banks that hold other lenders above that threshold.
The divestment allows BBVA to boost its fully-loaded BIS III core capital by €2.4bn in anticipation of new Basel III capital requirements. The transaction will raise BBVA's fully-loaded BIS III core capital ratio by 72 basis points.
BBVA will remain a shareholder of CNCB with a 9.9% stake but the strategic agreement between both parties will no longer bound the Spanish bank to exclusivity rules. As such, BBVA expects to open a branch in China soon.
BBVA's stake will now be treated differently and seen as a non-strategic financial stake available for sale. "This accounting change will have a negative effect of around €2.3bn on attributed earnings this year because the entire 15% stake will be valued at market prices," BBVA explained.
Earlier this week, analysts at Credit Suisse noted that declaring the stake non-strategic or placing it for sale would generate capital in the order of 75 to 115 basis points in the near-term but at a greater cost over the longer term.
As part of the transaction, BBVA is marking its 15% stake at market prices. It will take a €2.3bn charge after reducing its stake to free up capital. By reducing the stake below 10%, BBVA avoids stricter Basel III capital rules for banks that hold other lenders above that threshold.
The divestment allows BBVA to boost its fully-loaded BIS III core capital by €2.4bn in anticipation of new Basel III capital requirements. The transaction will raise BBVA's fully-loaded BIS III core capital ratio by 72 basis points.
BBVA will remain a shareholder of CNCB with a 9.9% stake but the strategic agreement between both parties will no longer bound the Spanish bank to exclusivity rules. As such, BBVA expects to open a branch in China soon.
BBVA's stake will now be treated differently and seen as a non-strategic financial stake available for sale. "This accounting change will have a negative effect of around €2.3bn on attributed earnings this year because the entire 15% stake will be valued at market prices," BBVA explained.
Earlier this week, analysts at Credit Suisse noted that declaring the stake non-strategic or placing it for sale would generate capital in the order of 75 to 115 basis points in the near-term but at a greater cost over the longer term.
