ICBC to buy into S. Africa's Standard Bank -source

SHANGHAI, Oct 25 (Reuters) Industrial and Commercial Bank of China (ICBC) has agreed to buy a large stake in Standard Bank , Africa's biggest lender by assets, a source familiar with the situation said, in a deal reported to be worth .5 billion.

FT.com, citing a banker close to the deal, reported that ICBC will pay .5 billion for a stake of about 20 percent in the South African bank.

This would be the biggest overseas acquisition by a Chinese commercial bank as Beijing encourages major state firms to expand abroad, particularly in developing countries.

The source, who asked not to be identified, told Reuters ICBC would become the single largest shareholder in the South African bank after the purchase, but declined to reveal the size of the stake that ICBC is buying.

Johannesburg-based Standard Bank operates in 18 African countries, including South Africa, and 21 other countries across the world.

''ICBC is buying into Standard Bank because Chinese companies are swarming to Africa to do business. We want to boost our financial services such as trade finance to Chinese clients there,'' the source said.

China has been pouring investment into resource-rich Africa amid criticism from Western aid groups and officials, who say that it is turning a blind eye to misrule and corruption as it woos African nations with investment.

China says it is spreading prosperity in the world's poorest continent where the West failed.

ICBC, China's biggest lender, in which Goldman Sachs, Allianz Group and American Express hold stakes, will represent two seats on the African bank's board and it would likely announce the deal as early as Thursday, the source said.

Goldman Sachs advised ICBC on the deal, sources said.

EXPANSION DRIVE Standard Bank itself has been expanding through acquisitions.

Since the start of 2006, the group bought control of Nigeria's IBTC Chartered Bank and most of Bank of America Corp.'s BankBoston Argentina assets.

A spokesman for ICBC, which bought a 90 percent stake last December in PT Bank Halim Indonesia and agreed in August to pay 3 million for 80 percent of Macau's Seng Heng Bank, declined to comment.

Standard Bank was not immediately available for comment, but is due to hold a news conference on Thursday (at 1200 GMT).

ICBC, which overtook Citigroup in July as the world's biggest bank by market value, is flush with cash and eyeing expansion opportunities after raising .9 billion last year in the world's biggest IPO.

ICBC Chairman Jiang Jianqing said this month he wanted overseas business to account for 10 percent of ICBC's total revenues, up from 3 to 4 percent now. It planned to open branches in Doha, Dubai, Moscow and Sydney, he said.

The Standard Bank deal, in which ICBC would buy new shares to be offered by the African bank and some of its existing shares, requires approval from both companies' shareholders as well as regulators in China and South Africa, the source said.

ICBC's Hong Kong-listed shares were down 1.42 percent at midday on Thursday, lagging a 0.9 percent drop in the index of Chinese companies listed in Hong Hong, ahead of its earnings results due later in the day.

ICBC shares have risen 43 percent so far this year, lagging an 87 percent gain in the H-share index.

REUTERS SR BD1238