LONDON – The Spanish lender Banco Santander has agreed to buy an 8 percent stake in Bank of Shanghai for 470 million euros as part of its strategy to increase its presence in Asia.
The deal, valued at about $646.8 million and announced late on Tuesday, includes a cooperation agreement between the banks and makes Santander the second-largest shareholder in Bank of Shanghai. The Chinese bank has €98 billion in assets and operates 294 branches, mostly in Shanghai.
Santander, one of Europe’s largest banks, is buying a stake held by the British bank HSBC, which said it planned to focus on expanding its own operations in China and its partnership with Bank of Communications. HSBC owns a 19 percent stake in that bank.
As part of the deal, Santander will provide a permanent team of its employees to share knowledge with Bank of Shanghai, and the two companies expect to develop joint wholesale banking activities.
The transaction is subject to regulatory approval and is expected to be completed in the first half of 2014.
The deal is Santander’s latest foray into China. The bank received approval in May to buy a 20 percent stake in Bank of Beijing’s consumer finance subsidiary. This year it also started Fortune Auto Finance, a joint venture with the Chinese car manufacturer Anhui Jianghuai Automobile.
Santander has also opened branch offices in Shanghai and Hong Kong — and a representative office in Beijing — as it looks to develop investment banking operations in China.
The bank’s fortunes have improved after it wrote down billions of dollars of mortgages last year as a result of a weak economy in Spain, its home market. In October, Santander reported profit of €1.1 billion as it continued to benefit from declines in charges taken for bad loans.