banking looks set to continue shifting towards the cash rich arms
of the Middle East and Asia-Pacific, despite investors in these
markets nursing some big losses from recent deals which have, to
date, gone sour.
While a number of major Asian banks have expressed caution about
investing in the West in the current market turmoil, notably
Industrial and Commercial Bank of China and China Construction
Bank, some remain upbeat: Bank of China says it is open to the
possibility of buying into US banks in the wake of the global
financial crisis. “We are open, from a business point of view. We
are looking for all possible deals everywhere,” said Zhu Min,
vice-president of Bank of China, on 29 September.
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Japan’s largest bank by market capitalisation, Mitsubishi UFJ,
also remains bullish about investment opportunities. On 29
September, it agreed to pay $9 billion for a 21 percent stake in US
investment bank Morgan Stanley. On the same day, it also concluded
a $3.5 billion deal to snap up the remaining 35.1 percent of
California-based retail bank UnionBanCal it does not already
own.
Beleaguered banks in plentiful supply
But while opportunities to buy up stakes in beleaguered banks in
Europe and the US at knock-down prices remain in plentiful supply,
the ongoing collapse in bank shares and losses sustained by
investors in UBS, Merrill Lynch, Citi, Morgan Stanley and others,
present a cautionary tale. Singapore’s Temasek fund, for instance,
invested £975 million ($1.7 billion) in Barclays in August 2007 at
a price of £7.20 per share, representing 2.1 percent of Barclays’s
issued share capital – more than double Barclays’s current share
price of around £3.25; China Development Bank took a 3.1 percent
stake at the same time.
Of course, a number of investment vehicles based in the West are
also nursing substantial losses on bad investments: JC Flowers led
a group of investors to buy a 24.9 percent stake in Germany’s Hypo
Real Estate for $1.77 billion five months ago, a stake now worth
around $250 million; and TPG Capital led a $7 billion capital
infusion in now-defunct Washington Mutual back in April.
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