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THE Agricultural Bank of China will launch its long-expected restructuring plan soon, the central bank governor said yesterday. The restructuring plan will be decided soon to elevate the bank into a strong and internationally competitive bank, Zhou Xiaochuan, the governor of the People's Bank of China, said yesterday at a financial forum in Beijing. Zhou said China's financial institutions should actively be engaged in the development of the agricultural sector, which is ABC's main focus. He added that the restructuring will start next year. Central Huijin Investment Co, which recently merged with China Investment Corp, will be involved in the restructuring of China Development Bank and ABC, said Lou Jiwei, chairman of the CIC, the country's sovereign wealth fund, at the forum. Deputy Finance Minister Li Yong was reported as saying earlier that one-third of the CIC's US$200 billion start-up capital, or US$66 billion, will be injected into China Development Bank and ABC for

CHINA Investment Corp, the US$200 billion fund that last week invested US$5 billion in Morgan Stanley, has denied it bought a stake in the Australia & New Zealand Banking Group, Bloomberg News reported today. "We didn't buy any stake," Lou Jiwei, chairman of Beijing-based China Investment, said at a press event without elaborating. He also denied buying a stake in China Petroleum & Chemical Corp. The central government is loosening restrictions on overseas investment to counter inflows from a record trade surplus that has driven up local stock and property prices. Investing more money abroad will help cool the world's fastest-growing major economy and diversify risk for China's more than US$1.4 trillion of foreign-exchange reserves, the world's largest. Lou said on November 29 that CIC "wants to be a stabilizing force in the international capital markets." He cited a "recent example" in which a similar fund invested in a financial firm that had

CHINA Pacific Insurance (Group) Co Ltd shares fell back slightly in afternoon trade on the Shanghai Stock Exchange after this morning's stellar debut. The shares opened at a premium of 70 percent to their IPO price and sold as high as 51.97 yuan (US$7.09) before settling back to finish the day at 48.17 yuan -- 60.57 percent above the issue price of 30 yuan. The company issued one billion A shares on the Shanghai Stock Exchange, making it the third insurer listed on the Chinese mainland after its larger rivals China Life and Ping An Insurance. China has urged its largest financial firms to sell stock domestically to give mainland investors more choices. The A shares account for 12.99 percent of China Pacific's expanded share capital and the money raised through the domestic listing will be used to replenish capital to help expand the business, its prospectus said. Shenzhen-based Ping An, the nation's second-biggest insurer, raised US$5 billion in February in the world's

The major source of Merrill Lynch’s $6.2 billion cash infusion, announced Monday, was fairly unsurprising: Singapore. It is just the latest Asian country to invest in a troubled financial firm, following China’s decision to pour $5 billion into Morgan Stanley. Merrill’s other investor, however, was a bit of a dark horse. It was Davis Selected Advisors, a [...]

NANYANG Commercial Bank plans to at least double its network on the Chinese mainland in two years after it opened its local incorporation today. Nanyang Commercial Bank (China) Ltd opened in Shanghai yesterday to offer unlimited yuan services to Chinese. The Hong Kong-based bank gained approval to set up the local incorporation with a registered capital of 2.5 billion yuan (US$341 million) from the China Banking Regulatory Commission on December 4. Nanyang Commercial Bank has six branches and one sub-branch on the Chinese mainland in Beijing, Shenzhen, Guangzhou, Dalian, Haikou and Shanghai. "Network expansion is a key part of the local incorporation's business development," the bank said. The bank will first focus on major cities in the Pearl River Delta, Yangtze River Delta and the coastal area. It will also seek other opportunities in other areas. The bank will focus on personal financial planning products and services in retail banking. In corporate banking,

GE Capital, the financial unit of General Electric Co., said Monday it will acquire the bulk of the Merrill Lynch Capital commercial finance operations, allowing Merrill to redeploy about $1.3 billion into other parts of its business.

NEW YORK (MarketWatch) - GE Capital, a unit of General Electric Co. on Monday said it agreed to purchase most of Merrill Lynch Capital, Merrill Lynch's wholly-owned middle-market commercial finance business. Financial terms were not disclosed. The acquisition, expected to close in the first quarter of 2008, will add more than $10 billion in assets and $5 billion in commitments to GE Capital Commercial Finance's base of $260 billion. GE Capital said it will buy Merrill Lynch Capital's corporate finance, equipment finance, franchise, energy and healthcare finance units. Merrill Lynch Capital's commercial real estate finance unit is not part of the transaction.

UNITED States 10-year Treasury note yields have risen to a three-day high on signs that central banks were adding enough funds to the financial system to spur bank lending. Ten-year notes fell on Friday by the most since December 12, paring a weekly advance, as central bank auctions of short-term loans totaling US$64 billion brought down bank-lending rates, fueling optimism the US economy will avoid a recession. Reports this week may show a slide in home prices is deepening. "As we move through 2008, we expect rates to move higher because consumers will prove resilient despite declines in housing, and growth will not fall off a cliff as the market is implying," Michael Pond, an interest-rate strategist in New York at Barclays Capital Inc, one of the 20 primary securities dealers that trade with the Federal Reserve, told Bloomberg News. Ten-year yields rose 12 basis points on Friday, or 0.12 percentage point, to 4.17 percent, according to bond broker Cantor Fitzgerald

ADVANTAGE Partners LLC, Japan's largest buyout fund, offered to buy Tokyo Star Bank Ltd for as much as 252 billion yen (US$2.2 billion) in the nation's biggest bank takeover in two years. Advantage agreed to buy Dallas-based Lone Star Funds' 68 percent stake in the bank for 360,000 yen a share, it said in a statement on its Website, Bloomberg News said. It offered to buy the remainder of the bank's traded stock at the same price. Tokyo Star shares closed at 352,000 yen yesterday. The acquisition gives Advantage 35 branches and 1.5 trillion yen of deposits, with a niche in lending to small companies in Japan's capital. Tokyo Star has dropped 16 percent since talks between the two were first reported in May, as investors dumped Japanese banking stocks amid sluggish loan growth and losses on mortgage-related investments. "Advantage found value in the deal after Japanese financial institutions were sold down to very attractive levels," said Yoji Takeda, who helps manage

SAN FRANCISCO (MarketWatch) -- Fitch Ratings said on Friday that it may cut Ambac Financial's AAA rating because of potential losses and downgrades of collateralized debt obligations guaranteed by the bond insurer. The AAA rating of Ambac's bond insurance unit was put of Rating Watch Negative by Fitch, which means the agency will downgrade to AA+ in four to six weeks unless the company can boost is excess capital levels before then. A review by Fitch of Ambac's exposure to CDOs and residential mortgage-backed securities found that the insurer is roughly $1 billion short of the extra capital it needs to keep its AAA rating, the agency explained. The review included an assessment of a $3 billion commitment by Ambac to fund a pool of other structured finance CDOs as of Sept. 30, Fitch noted. Ambac shares fell 4.2% to $26.55 during midday trading on Friday.

LONDON (MarketWatch) -- Switzerland's UBS is facing a shareholder revolt over its plans for a cash injection from Singapore and the Middle East, according to a report in the Financial Times Friday. Ulrich Grete, head of the Swiss Social Security Compensation Fund, said the deal would disadvantage existing investors and also called on UBS to name the Middle Eastern investor who will own nearly 2% of the group, according to the report. Another investor has demanded a special audit to look at how the bank made such big losses, it added. The Financial Times also said that the Middle East investor is from Saudi Arabia and added Prince Sultan, the crown prince and defense minister, was believed to be a leading figure in negotiating the deal. UBS announced the capital injection of around $11.5 billion earlier in December after taking a further $10 billion of write-downs.

There is certainly a path out of the gathering banking crisis, but no guarantee that the world economy will find it A CREDIT crunch, a liquidity squeeze, a subprime meltdown--the shape-shifting menace that has vexed the world in 2007 has been all these things. But now it looks like becoming a banking crisis as well. The grievous experience of two centuries of financial busts is that when the banking system is in difficulties the mess spreads. Straitened banks lend less, sucking money out of the economy. In rich countries that threatens to tie down companies and give ailing housing markets a kicking. The data barely show it yet, but the financial malaise could yet be aggravated by a broader economic malaise. Back in October it briefly seemed as if the summer's turmoil was abating. But a month later investors' confidence took a giddying turn as the weakening American housing market jeopardised the banks' capital. In December the leading central banks acted together to jolt the money markets into life. On December 18th the European Central Bank lent almost EURO350 billion ($500 billion) to tide banks over the new year. And yet most fear-meters, including, crucially, the price banks have to pay for funds (see chart), still register chronic anxiety. ...

EUROPEAN stocks have had the biggest weekly loss in a month, led by mining companies and banks, on concern a plan by central banks to add cash to the financial system won't prevent an economic slowdown. "That's not the same as a broad rate cut," said Gerard Piasko, who oversees the equivalent of US$107 billion as chief investment officer of Julius Baer Holding AG's private banking division in Zurich. "The market prefers a proactive monetary policy. Risks to growth are increasing." BHP Billiton Ltd and Anglo American Plc, the world's largest mining companies, led an industry measure to its steepest drop in four weeks. HBOS Plc, the UK's biggest mortgage lender, tumbled the most in a month. UBS AG fell after Europe's largest bank by assets said a bond sale to replenish capital may raise the number of shares by as much as 12 percent, Bloomberg News reported. The Dow Jones Stoxx 600 Index dropped 1.5 percent to 367.24, the steepest decline since the week ended

CITIGROUP Inc Chief Executive Officer Vikram Pandit's decision to bail out seven subprime-infected investment funds with US$49 billion in assets may increase the chance of a dividend cut at the largest United States bank. The rescue package erodes the bank's capital buffer against loan losses, Bank of America analyst John McDonald has written in a report. The move adds pressure on the bank to reduce its quarterly 54-cent-a-share payment to investors, said Meredith Whitney, an analyst at CIBC World Markets. "The risks continue to mount for this already vulnerable financial giant," Whitney said in a report. Citigroup's SIV plan "will further imperil its fragile capital ratios going into the fourth quarter and surely pressure the company to continue to raise capital, sell assets and cut its dividend." Citigroup has tumbled more than 40 percent this year on the New York Stock Exchange as the collapse of the subprime mortgage market led to at least US$9 billion of

Vikram Pandit, the new chief executive of Citigroup, has put his bank under further financial strain by bringing $49 billion ($£24 billion) worth of high-risk off-balance sheet investments onto its books just as new analysis predicts it will need to take a $30 billion writedown on its loan portfolio next year. In his first decisive move as Citigroup$’s leader, Mr Pandit pledged to provide the necessary funds to keep afloat seven so-called structured investment vehicles (SIVs) - independent debt-financed entities – that the bank runs and is ultimately responsible for. These kind of opaque funds are finding it virtually impossible to refinance their debt as the value of their mortgage-related securities declines. Many are being forced into a fire sale of assets to maintain their capital base, which is pushing prices down further. The US Treasury is working with Citigroup, Bank of America and JP-Morgan Chase to set up a $100 billion fund to prop up prices by buying assets from the SIVs. However, in what may prove an embarrassing failure for Henry Paulson, the US Treasury Secretary, Citigroup$’s decision to back its SIVs has taken the already struggling bailout fund to the brink of collapse. It emerged last week that the fund had scaled down its ambitions to less than half the original target because it could not attract enough banks to participate in the scheme. Citigroup’s move, which came despite repeated assurances that it would not bring the SIVs onto its balance sheet, removes the key beneficiary of the bailout fund, since the bank had the largest exposure to the vehicles on Wall Street. Analysts said that despite Citigroup’s assurances that it “continued to support [the fund’s] formation”, it is unlikely to take its role as a key architect of the fund so seriously now that it will no longer require its services. Citigroup has already announced that it expects to lose about $15 billion this year from declines in the value of sub-prime related investments. It is expected to suffer further writedowns after taking the SIVs onto its books because of their exposure to bonds, backed by high-risk home loans, that are rapidly declining in value after a surge in defaults on the underlying mortgages. But the bank is likely to suffer much larger writedowns next year, as defaults on mortgages, credit card debt and car

CHINA'S total stock market capitalization is expected to double to 59 trillion yuan (US$7.92 trillion) by 2010, accounting for 150 percent of the country's gross domestic product, the Shanghai Stock Exchange said yesterday. The estimate is based on a projected actual growth of about 10 percent annually in the country's economy during the three-year period, the local bourse said in its new research report. Funds on the two mainland bourses in Shanghai and Shenzhen are expected to rise by an average 15 percent yearly in the next three years, to hit US$900 billion in 2010, the report said. "We expect the ratio of direct fund raising will improve significantly and group listings by large state-owned enterprises will expand the market value," the research unit of the bourse said in the report. "More financial innovation is likely to pop up." The country is expected to launch a growth board "soon," which will make it more convenient for venture capital

Lehman Brothers Holdings Inc.'s fiscal fourth-quarter net income fell 12% to $886 million, or $1.54 a share, from $1 billion, or $1.72 a share, a year earlier, the company said Thursday. For the quarter ended Nov. 30, the New York investment bank said net revenue, representing total revenue less interest expense, dropped to $4.4 billion from $4.5 billion. For the year, however, it said net revenue, net income and earnings per share were at record levels. For the quarter, Capital Markets net revenue declined 10% to $2.7 billion. Fixed Income Capital Markets net revenue dropped 60% to $860 million, due to negative valuation adjustments on trading assets, principally in the firm's Securitized Products and Real Estate businesses. Equities Capital Markets net revenue more than doubled to $1.9 billion. Investment Banking net revenue slipped 3% to $831 million. On average, analysts polled by Thomson Financial expected earnings of $1.42 a share on revenue of $4.26 billion.

HAINAN Airlines Co will acquire financial assets from its parent to boost its capital, the Shanghai-listed carrier announced yesterday. The airline will pay HNA Group 595 million yuan (US$80.5 million) for 29.77 million shares of China Merchants Securities Co, accounting for 0.92 percent of the broker's total shares, at 20 yuan apiece, according to a statement filed with the Shanghai Stock Exchange. Hainan Airlines has the right to adjust the price based on an initial public offering price of the broker if it goes public within one year on the mainland stock market, the statement said. The Shenzhen-based brokerage has applied to the regulator to launch an IPO. It hopes to sell shares publicly as early as the end of this year to tap the current bullish market sentiment. The broker earned a half-year net profit of 2.4 billion yuan in 2007, compared with 1.1 billion yuan for the whole of last year. It has total assets of 19.6 billion yuan and 52 outlets nationwide. HNA Hotels &

Prudential Financial, the life insurer, acquired Round Hill Capital Partners Kabushiki Kaisha, a Japanese real estate management firm. Round Hill, established in 2001, previously provided asset management services to Prudential Real Estate Investors, Prudential said. Round Hill has arranged 19 investments for Prudential real estate totaling $1.5 billion. Terms were not disclosed. Prudential is based in Newark, N.J.

Mizuho Financial will give its Mizuho Securities subsidiary a $1.37 billion injection in an effort to shore up the brokerage firm's capital base and keep its planned merger with Shinko Securities on track.