Spain's Santander To Buy 8% Stake In Bank Of Shanghai From HSBC

(RTTNews) - Spanish bank Banco Santander, S.A. (SAN, BNC.L) agreed Tuesday to buy an 8 percent equity stake in Bank of Shanghai Co., Ltd. or BoS, and also reached a co-operation agreement to jointly develop wholesale banking activities in China. The deal, valued at about 470 euros or $646 million, is expected to close in the first half of 2014.

The deal, which is subject to approval from the China Banking Regulatory Commission, will make Santander the second-largest shareholder in BoS and its strategic international partner. The deal will also have an impact of about 1 basis point on the Santander's capital.

British bank HSBC Holdings Plc's (HBC, HSBA.L) agreed to sell the minority stake in BoS to Santander as part of its strategy to exit non-core operations to focus on core businesses, according to HSBC's form 6-K filing with the U.S. SEC on Tuesday.

The filing revealed that the BoS stake was accounted for by HSBC as an available-for-sale asset with a fair value of HK$3.63 billion or about $468 million, in the balance sheet at September 30, 2013.

HSBC had acquired the 8 percent equity stake in the 196-branch BoS in 2001 for RMB 517.92 million or about $62.6 million in cash to expand in China.

Meanwhile, the co-operation agreement will see Banco Santander help BoS in developing joint wholesale banking activities in China. Santander will provide BoS with a permanent team of professionals, who will contribute Santander's knowledge and experience in risk management and commercial and retail banking.

The stake acquisition and co-operation agreement will strengthen Santander's position in the country.

Santander's deal to buy a 20 percent stake in Bank of Beijing Co.'s consumer finance business has already received regulatory clearance in May 2013. It also entered into a joint venture with Chinese car manufacturer Anhui Jianghuai Automobile in March 2013 to create a multi-brand car finance company Fortune Auto Finance.

Santander is the largest bank in the euro zone by market capitalization and has presence in 10 main markets. It is the largest financial group in Spain and Latin America, with also significant positions in the U.K., Portugal, Germany, Poland and the northeast U.S.

SAN closed Tuesday's regular trading session at $8.64, down $0.01 or 0.12% on a volume of 2.47 million shares.

In Madrid, Banco Santander shares closed at 6.23 euros, down 0.05 euros or 0.83% on a volume of 63.36 million shares.