China may be in talks with BPCE, Nova Scotia on Guangzhou stake

The government of China’s southern city of Guangzhou is seeking to sell 20 per cent stake in the Bank of Guangzhou to a foreign investor for $850 million, a person with knowledge of the matter said.

Bank of Guangzhou, the city’s seventh-largest lender, has allowed due diligence by potential buyers, including Groupe BPCE, France’s second-largest bank by branches, and the Bank of Nova Scotia, Canada’s third-largest lender, the source said on condition of anonymity.

Since 2006, foreign investors have announced plans to inject more than $16 billion into Chinese banks as the country’s GDP more than doubled. In May, Frankfurt-based Deutsche Bank AG said it would spend about $811 million to boost its stake in Huaxia Bank to 19.99 per cent.

“This can be seen as a unique opportunity for a well-capitalized foreign bank to get immediate exposure to China’s banking system,” said Michael Werner, a Hong Kong-based analyst at Sanford C Bernstein & Co. “The question is how many foreign banks have healthy enough capital positions to consider this purchase.”