Citigroup has sold its stake in India’s Housing Development Finance Corporation (HDFC) for $1.9 billion, as global banks focus on shoring up their balance sheets to meet stricter capital requirements.
Citi said on Friday it would likely record an after-tax gain of about $722 million from the sale of its 9.9 per cent holding in India’s biggest mortgage lender.
Analysts expect global banks, as well as buyout firms, to step up sales of their holdings in Asian companies over the next few months, taking advantage of a rebound in share prices.
“Many of these investments were made when Western banks were flush with cash and Asian valuations were cheap,” said Jeff Yeh, chief investment officer at Capital Investment Trust in Taipei, which has more than $1 billion in assets under management.
“With tighter capital requirements and more problems back home, it seems reasonable that some of these banks are thinking about selling their Asian investments at a profit,” he said.
“This is a recurring theme that I expect to continue happening for most of this year.”
Major foreign bank holdings in Asia include HSBC’s 19.9 per cent stake in China’s Bank of Communications and Dutch bank and insurance group ING’s 26 per cent holding in TMB Bank in Thailand.
Citi itself owns 20 per cent of China’s unlisted Guangdong Development Bank, which was reported to have been planning a $4 billion initial public offering last year.
Bank of America made an after-tax profit of $1.8 billion in November from its sale of shares in China Construction Bank.
From 2013, banks across the world will be required to use a common format for disclosing the size and quality of their capital safety buffers to help reassure investors they are stable. Citi’s sale of its holding in HDFC is the biggest share sale in the Indian market since April last year, according to Thomson Reuters data.
It follows the sale of stakes in other Indian financial firms by international investors including US private equity firm Carlyle Group and Singapore state investor Temasek Holdings.
Temasek, Carlyle and Warburg Pincus raised $740 million by paring their stakes in financial companies, including HDFC, in three separate deals earlier this month. The sales have coincided with a sharp rise in the share prices of Indian financial companies, which would be among the main beneficiaries of expected interest rate cuts by the Reserve Bank of India later in the year. India’s stock market has risen about 16 per cent so far this year. MSCI’s broadest index of Asia Pacific shares outside Japan has risen 14 per cent in the same period.
The sale of the HDFC stake is part of “ongoing capital planning efforts,” Citi said in a statement. The bank sold 145.3 million HDFC shares at 657.56 rupees each.