* ICBC shares fall 5.7 pct in two days after Monday's $479
mln block deal
* AmEx hedged its stake via a deal structured by Goldman -
* AmEx still owns about $463 million worth of stake in ICBC
(Adds source comments, details, background)
By Denny Thomas and Wei Gu
HONG KONG, Aug 3 American Express Co (AXP.N) has
assured Industrial and Commercial Bank of China Ltd (ICBC)
(1398.HK) it wants to keep its stake in the lender after
entering into a contract to hedge fluctuations in the stock
price, a source with direct knowledge of the matter told Reuters
Shares in ICBC, the world's biggest bank by market value,
have fallen 5.7 percent in the past two days after Goldman Sachs
(GS.N) executed a $479 million block deal. Hong Kong's benchmark
Hang Seng index .HSI is down nearly 3 percent in the same
For a detailed story double click: [ID:nL3E7J11SV].
There has been some speculation that American Express was
paring its exposure to ICBC, but two sources close to the deal
said American Express was only locking in the value of its ICBC
holdings through a hedging contract structured by Goldman.
American Express holds 638 million shares, or less than 1
percent of ICBC's Hong Kong-listed shares.
"American Express is not selling its shares, they did that
to protect the value of their holdings," one of the sources
said. "Their role as a strategic investor in ICBC is unchanged,"
the source added.
One of the sources said the hedging deal was struck with
Goldman to reduce the impact on earnings from any volatility in
ICBC's share price.
American Express paid $200 million to buy 1.28 billion Hong
Kong shares of ICBC for in 2006 as part of a group of strategic
investors before ICBC's IPO. When the lock-up expired, American
Express sold half its stake in April 2009 for some $310 million.
It still holds $463 million worth of shares based on
Wednesday's close, which puts it on course to earn five times
return on its initial investment.
Several U.S. and European banks, including Goldman Sachs,
American Express, UBS AG UBSN.VX, Bank of America/Merrill
Lynch BCA.N invested in Chinese banks as strategic investors
before these banks did their initial public offerings.
Some of these institutions have either sold their stakes or
trimmed their exposures overtime.
Last month, Singapore state investor Temasek Holdings
[TEM.UL] sold $3.6 billion worth of stakes in two of China's top
four banks. That sale came a day after ratings agency Moody's
warned of a possible downgrade for Chinese banks due to their
higher-than-expected exposure to local government debt.
Temasek's selldown has sparked concern that other strategic
investors might exit Chinese banks. The short-term outlook for
Chinese financial stocks is also clouded as an estimated $35
billion worth of banks and insurance stocks are expected to come
out of lock-ups. For a related Dealtalk: [ID:nL3E7I618B].
The sources were not authorised to speak to the media.
American Express did not immediately respond to a request for
comment, while ICBC was not available for an immediate comment.
(Additional reporting by Elzio Barreto; Reporting by Denny
Thomas, Wei Gu and Charlie Zhu; Editing by Chenyee Lee, Will
Waterman and Jane Merriman)
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