The banking giant confirmed that a Citigroup-led consortium has reached an agreement to acquire an 85.6% stake in Guangdong Development Bank for US$3.06 billion. At closing, Citigroup will own a 20% stake in GDB, as will China Life and State Grid. CITIC Trust will hold a 12.85% stake, Puhua will hold an
8% stake and IBM will hold an approximate 4.74% stake.

The firm reports that this transaction represents the first time a major international financial services company, leading a consortium of co-investors, has been permitted to obtain substantial ownership and assume a significant management role in a Chinese financial institution. “The transaction also complements Citigroup’s current operations and other investments in this market and contributes to the long-term success of China’s banking sector,” it says.

William Rhodes, chairman and CEO of Citibank N.A., senior vice chairman, Citigroup said, “The continued emergence of China’s economy represents a tremendous opportunity for Citigroup, and we look forward to working with GDB to build its operations and enhance the products and services it offers to customers.”

“We are delighted to have been selected as the leader of the consortium, with our outstanding co-investors, to invest in Guangdong Development Bank to support GDB’s transformation and help it
to achieve its future potential,” added Robert Morse, CEO of Corporate & Investment Banking Asia
Pacific. “We believe this investment is a positive outcome for all stakeholders involved, including the
Guangdong Government, GDB’s management, employees, customers, shareholders and the new investors. It is an important milestone in our efforts to contribute to the long-term success of China’s economy and its banking sector. “

The agreement allows Citigroup to work with GDB on a daily basis to enhance its management team and corporate governance standards, instill operational and lending best practices, improve risk
management and internal controls, upgrade the bank’s information technology infrastructure, and further develop its customer service and product offerings.

GDB is a national bank with one of the largest branch networks amongst China’s joint stock banks with 27 branches nationwide and 502 outlets. It has assets of US$47.9 billion with 12 million consumer customers, 9 million cardholders, 16,000 SME customers and 12,474 employees.

State Grid, one of the Chinese co-investors, is a state owned backbone enterprise with the construction and operation of the national power grid as its core business. In addition, Citigroup asked IBM to become a partner in this investment. “Citigroup and IBM will look for ways to cooperate as Guangdong Development Bank transforms its operations and moves forward towards becoming a best-in-class banking platform,” it says. “IBM has brought business value and technology expertise to clients in China and other developing countries to help them strengthen their infrastructure, and
sees Guangdong Development Bank as a similar opportunity.”