UCBH to Buys Shanghai-Based Bank for $205MM

UCBH to Buys Shanghai-Based Bank for $205 Million
By Jonathan Stempel

NEW YORK, March 27 (Reuters) - UCBH Holdings Inc.(UCBH.O: Quote, Profile , Research), the largest bank that specializes in serving Chinese-Americans, said on Tuesday it will buy Shanghai's Business Development Bank Ltd. for $205 million in cash to offer services to customers who do business in China.

Privately held BDB was established in 1992 as China's first wholly foreign-owned bank. China's economy grew 10.7 percent last year, and is the world's fourth-largest.

UCBH, the San Francisco-based parent of United Commercial Bank, becomes the first U.S. community bank to buy a Chinese-based bank, according to Friedman, Billings, Ramsey & Co. analyst James Abbott.

"This is a landmark acquisition," Abbott wrote. "With a full banking license in mainland China, UCBH can ... accelerate the growth of the trade finance portfolio and drive earnings per share higher." Abbott rates UCBH "outperform."

BDB has $217.2 million of assets, $188 million of loans and $25.5 million of deposits, and is licensed to conduct foreign currency business with non-Chinese companies and individuals. It also has offices in Beijing, Guangzhou and Shantou.

UCBH Chief Executive Thomas Wu said the purchase should save his company at least four to five years in achieving its expansion plans in China. The company plans to add two or three more branches there within three years, he said "This announcement came sooner than expected and we think it is a significant step toward its transition into a trade-focused Chinese-American corporation," wrote Lehman Brothers Inc. analyst Andrea Jao. She rates UCBH "overweight."

UCBH has $10.35 billion of assets, 50 banking offices in California; banking offices in New York, Atlanta, New England, the Pacific Northwest, Houston and Hong Kong; and offices in Shanghai, Shenzhen and Taipei. It agreed in January to buy New York's Chinese American Bank for $130.7 million.

BDB would become a unit of United Commercial Bank and take the latter's brand name. The transaction is expected to close in the fourth quarter, pending U.S. and Chinese regulatory approvals. UCBH expects the transaction to marginally lower earnings per share in 2008, and increase it thereafter.

Germany's Deutsche Bank AG (DBKGn.DE: Quote, Profile , Research) on Monday said it applied with Chinese regulators to incorporate locally in the country. Bank of East Asia Ltd. (0023.HK: Quote, Profile , Research), Citigroup Inc. (C.N: Quote, Profile , Research), HSBC Holdings Plc (HSBA.L: Quote, Profile , Research)(0005.HK: Quote, Profile , Research)(HBC.N: Quote, Profile , Research) and Standard Chartered Plc (2888.HK: Quote, Profile , Research) (STAN.L: Quote, Profile , Research) won approvals last week.

Shares of UCBH rose 16 cents to $18.75 in afternoon trading on the Nasdaq. (Additional reporting by Michael Flaherty)