Array

SHANGHAI/BEIJING, Oct 12 (Reuters) China has yet to decide whether Citigroup or Societe Generale has won a protracted bank bid, denying a Hong Kong newspaper report that said the U.S. bank had beaten its French rival, senior banking sources involved in the bid said on Thursday.

The battle for debt-laden Guangdong Development Bank, whose attraction is its country-wide network of more than 500 branches, is widely seen as a litmus test for how involved foreigners can become in the restructuring of the country's financial sector.

Hong Kong's South China Morning Post reported on Thursday, citing unidentified sources, that New York-based Citigroup had won State Council approval to buy Guangdong Development Bank in the south of China. It did not say when the U.S. lender had received approval from the State Council, China's cabinet.

Both Citigroup and Societe Generale declined to comment on Thursday morning. But a spokesperson at Guangdong Bank said no decision had been reached.

''At present, the bank is unaware that any decision has been made and we cannot forecast when there will be a conclusion,'' the spokesperson said by telephone from the lender's head office in Guangzhou.

Senior banking sources involved in the bid also said on Thursday that no deal had been reached.

''The bid is still alive, whether to Citigroup or to Societe Generale,'' said one source who is working closely with Guangdong Bank to finalise the bid.

''All top leaders, including Premier Wen Jiabao and Vice Premier Huang Ju, have been extremely busy with the internal 16th Communist Party congress recently, so it's unlikely that any decision (on the bid) has been made so far,'' the source added.

The congress ended on Wednesday.

The Citigroup-led consortium is bidding for an 80 percent stake in Guangdong Bank for about US$3 billion, with Citigroup aiming to take nearly 20 percent of its own. The Societe Generale consortium wants to buy 85 percent.

SPECULATION SWIRLS Banking sources said there had been widespread talk that Citigroup may have signed a deal to enter exclusive talks with Guangdong Bank on Sept. 30.

One senior industry source said the Citigroup- and Societe Generale-led consortiums had been requested to submit legal documents related to the bid late last week and into the weekend.

At least one of the consortiums had submitted all the documents to Deutsche Bank, one of the deal's financial advisers, the source said.

Speculation may have been fuelled by the arrival in Beijing late on Tuesday of two deputy governors from Guangdong province expected to have met high-level officials from the cabinet and banking regulator on Wednesday, according to one source working with the Guangdong province government.

The bidding has dragged on for about a year. Industry sources have said that both Citigroup and Societe Generale had submitted final bids late last month ahead of China's week-long national holiday, which started on September 30.

''Regulators were still consulting with both foreign banks over specific explanations and terms of their bids during the national holiday, so it is very clear that no decision has been made,'' said another Beijing-based source close to the regulators.

Last December, Citigroup's consortium won an initial round of bidding for an 85 percent stake of Guangdong Bank.

However, Beijing subsequently asked for new bids because the U.S. bank would have exceeded a 20 percent ceiling for a single foreign investor's holding in a Chinese bank. Total foreign investment in a bank is capped at 25 percent.

REUTERS PKS DS1506