SHANGHAI, Sept 20: Chinese officials said on Friday Citigroup has won approval to complete a minority acquisition in Shanghai Pudong Development Bank (SPDB), as the US-based lender expands its business by breaking into the mainland’s growing credit card business.

Citbank’s 600 million-yuan ($72 million), or 4.62 per cent, purchase of non-tradeable stock will make it SPDB’s fourth largest shareholder.

The agreement won approval from state asset regulators both in Shanghai and at the central government, SPDB said in a statement published in the China Securities Journal.

SPDB, a mid-sized lender, said it will sell 108.45 million of its 298.5 million shares to Citibank, while Shanghai Jiushi Corp., for its part, will divest 72.30 million of its 229.5 million shares.

Official approval was expected before the end of June, but officials said the decision was delayed due to Severe Acute Respiratory Syndrome (SARS), which at its height ground to a halt much of Chinese business.

Citibank Inc. will pay 3.32 yuan a share, compared with SPDB’s publicly traded price of 9.47 yuan at Thursday’s close.

The purchase, however, still comes at 1.2 times premium the bank’s net-asset-value per share of 2.86 yuan in June.

Citibank’s stake will allow it to peddle its credit card business, with plans afoot for a credit card management joint venture when regulations permit.

The bank also has the right to buy up to 24.9 per cent of SPDB’s stock between 2006 and 2008.

Citibank is among several foreign lenders that are aggressively positioning themselves in hopes of tapping China’s more than one trillion dollars in savings deposits as the country’s financial services industry gears up to fully open by the end of 2006, under promises it made on joining the World Trade Organization.

For the US’s largest retail banker, the tie up with SPDB follows a string of recent deals in China.

In its most prominent, earlier this year, the bank was approved as one of five foreign institutions for the country’s Qualified Foreign Institutional Investor (QFII) scheme, which allows foreign investors to conduct trades in China’s yuan-denominated A-share market.

In March last year, Citibank became the first foreign bank to gain approval from the People’s Bank of China to provide foreign exchange services directly to Chinese customers.—AFP