The trend witnessed in recent months with major U.S. banks cutting their stake in Chinese banks continues as Goldman Sachs (NYSE:GS) reportedly agreed to sell shares of Industrial and Commercial Bank of China (ICBC) worth nearly $2.3 billion to Temasek earlier this week.  It was Goldman which started the trend last November with its decision to reduce its stake in ICBC by a third for $1.5 billion in cash (see Goldman Sachs Sells ICBC Stake to Raise Cash, Reduce Earnings Volatility). Bank of America (NYSE:BAC) and Citigroup (NYSE:C) followed suit in subsequent months with stake sales in China Construction Bank Corporation (CCB) and Shanghai Pudong Development Bank respectively.
The size of Goldman’s stake in ICBC can be understood from the fact that the global investment bank reports its profit/loss from the stake as a separate item in its income statement. At the end of 2010, Goldman held 7.6 billion common shares of ICBC. This figure was reduced to about 5.2 billion shares at the end of the first round of share sales in November 2011.
- Recovery In FICC Trading Is Good For Goldman In The Long Run, Especially With The Volcker Rule Deadline Nearly Here
- Goldman Sachs Earnings Preview: Improved Security Valuation, Strong Investment Banking Fees To Drive Q3 Profits
- How Have Total M&A Deals Closed By Major U.S. Investment Banks Trended In The Last 5 Quarters?
- What Was The Share Of Major U.S. Investment Banks In The Global M&A Industry For Q3?
- How Have Equity Underwriting Deals Closed By U.S. Investment Banks Trended In The Last 5 Quarters?
- How Have Debt Origination Deal Volumes For U.S. Investment Banks Changed In The Last 5 Quarters?
We estimate that the recent stake sale to Temasek left Goldman with just under 3 billion shares in ICBC, valued at about $3 billion at current market prices.
The stake sale will reflect in Goldman’s Q2 2012 earnings release as a significant one-time profit. We include Goldman’s ICBC stake sale as a part of its Equities trading division in our analysis. The size of equity trading assets would likely have shrunk by about $2.3 billion as a result of the stake sale.Notes:
- Temasek buys $2.3 billion of ICBC shares from Goldman, Reuters, Apr 16 2012 [↩]