June 3 (Bloomberg) -- Banco Bilbao Vizcaya Argentaria SA, Spain's second-biggest bank, will double its stakes in units of China's state-owned Citic Group for 800 million euros ($1.24 billion) to increase revenue from the fastest-growing major economy.
BBVA will raise its holding in China Citic Bank Corp. to 10.1 percent from 5 percent, the Bilbao-based bank said in a filing to regulators. The Spanish bank has an option to increase that to 15 percent within two years, it said. BBVA's holding in Citic International Financial Holdings Ltd., also controlled by Citic Group, is being boosted to about 30 percent from 15 percent.
China's economy has expanded by more than 10 percent for nine straight quarters, driving consumer and corporate demand for loans and other financial services. In contrast, economic growth is slowing in Spain, Mexico and the U.S., where BBVA gets 80 percent of its profit.
``It's good to see banks diversifying their business away from the slowing Spanish economy,'' said Marta Campello, an investment manager at Abante Asesores in Madrid. ``This is going to be good news for the bank.''
From Citic International's point of view, the Spanish bank's increased investment is ``positive'' because the alliance adds products and clients, said Wong Kwok Wai, an analyst at BOC International Holdings Ltd.
BBVA will name three members to the board of Citic International and two to China Citic Bank, China's seventh- largest by assets, the Spanish company said. The units' parent, Citic Group, is China's biggest state-owned investment company.
BBVA advanced 0.6 percent to 14.16 euros in Madrid trading, for a market value of 53 billion euros. Citic Bank fell 1.8 percent in Hong Kong to HK$5.34, while those in Shanghai fell 1.9 percent to 6.37 yuan.
Planned Privatization
The increase in BBVA's holding in Citic International will follow a decision on the Hong Kong company's possible sale. Citic International's statement said the company's shares, which were suspended today, will remain so until it announces the details of a ``privatization proposal.''
BBVA bought its original stake in Citic Bank prior to the Chinese company's initial share sale in April last year.
Other foreign banks seeking to benefit from Chinese growth have also taken stakes in local banks. Bank of America Corp. agreed earlier this week to lift its share in China Construction Bank Corp. to 10.8 percent. HSBC Holdings Plc has an 18.6 percent stake in Bank of Communications Co. and also plans to hire 3,000 people there this year for its directly controlled unit.
More Branches
Standard Chartered Group Plc, which makes most of its profit in Asia, plans to increase its outlets to 60 this year from 38 and last year more than doubled its workforce in the country to 3,800.
Royal Bank of Scotland Group Plc bought a stake in Bank of China for $1.6 billion in 2005 and is offering wealth-management services in Shanghai and Beijing. It also has Chinese retail outlets from its acquisition of ABN Amro Holding NV.
Criteria CaixaCorp, the investment holding company of Spain's biggest savings bank, has an 8.89 percent stake in Bank of East Asia Ltd., Hong Kong's third-biggest by assets.
``This transaction places BBVA in an unbeatable position to leverage the tremendous growth potential inherent in the Chinese banking business,'' the bank said in a statement sent by e-mail.
``From a strategic point of view, we find it positive that BBVA continues to bet on Asia,'' said Diego Barron, an analyst at Fortis in Madrid.
To contact the reporter on this story: Chia-Peck Wong in Hong Kong at cpwong@bloomberg.net; Charles Penty in Madrid at cpenty@bloomberg.net
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