Australia & New Zealand Banking Group Ltd., Australia's No.3 lender, will announce an investment in China's Tianjin City Commercial Bank next week, its second foray into the world's fastest-growing major economy.

"We will sign a stake purchase agreement sometime next week," said Dong Zhengning, general manager of Tianjin Bank's Planning and Development Department. Dong declined to elaborate.

The Melbourne-based bank may buy as much as 20 percent of Tianjin City Commercial Bank for about A$150 million (US$110 million), the Australian Financial Review reported earlier yesterday.

China's 112 city commercial banks need foreign investors to help boost capital and improve management as the government prepares to lift restrictions on overseas lenders by the end of 2006. China's banking regulator said last year it plans to let the municipal lenders open branches outside their home cities for the first time.

"We are looking at a second potential investment in China," ANZ Bank Spokesman Paul Edwards said in an interview yesterday, declining to name the target. "We expect to announce that before Christmas, but there's still a little way to go in negotiations."

Bank of America Corp, Royal Bank of Scotland Plc and HSBC Holdings Plc are among 18 foreign financial institutions that invested a total of US$13 billion in Chinese lenders in the past four years, betting the banks will profit from increased borrowing in China. Earnings at China's five publicly-traded banks rose 30 percent last year.

The investment would be the second planned by ANZ Bank in China, where it has been in talks to buy 19.9 percent of Shanghai Country Commercial Bank. Chief Executive John McFarlane said last month he aimed to invest in a second Chinese bank, though he declined to confirm reports that his target is Tianjin City.

ANZ Bank stock fell 10 cents to A$23.70 yesterday in Sydney. It's risen 15 percent this year, compared with an 18 percent gain for the eight-member S&P/ASX 200 Banks Index.

Six of China's 12 city commercial banks, including Bank of Shanghai, Bank of Beijing, and Nanjing City Commercial Bank, have received US$1.2 billion of overseas investment in the past four years, according to China Banking Regulatory Commission. The number is expected to reach 10 by the end of this year.

"The next area of interest is in the third tier, the city commercial banks," said Wei Yen, managing director of financial institutions at Moody's Investors Service in Hong Kong. "We can see more acquisitions and joint ventures in the next year. If they haven't been working in the last year, they won't be getting anything opened in the next year."

Tianjin Bank, established in 1996, operates in Tianjin, the closest seaport to Beijing, with 180 outlets and total assets of 59 billion yuan (US$7.3 billion), according to its website.

The lender, ranked 17th among the top 50 city commercial banks, had 45 billion yuan (US$5.62 billion) of outstanding deposits and 26 billion yuan (US$3.25 billion) of loans.

(China Daily November 29, 2005)