Investment in Industrial and Commercial Bank of China (ICBC)
In 2006, Goldman Sachs purchases a 7 percent stake in ICBC worth more than US$2.5 billion—its largest-ever principal investment—reinforcing a deep strategic collaboration between the two banks.
Goldman Sachs’ involvement with Industrial and Commercial Bank of China (ICBC) dates back to a memorandum of understanding signed by CEO Henry Paulson, Jr. and ICBC President Jiang Jianging in 2003. Goldman Sachs agreed to set up a joint venture with ICBC to dispose of RMB10 billion of non-performing assets and to provide ICBC with guidance on best practices in international asset management.
2006 marked Goldman Sachs’ largest principal investment to date and strongly underscored its strategic commitment to mainland China. Together with Germany’s Allianz Group and American Express Company, the firm made an investment in ICBC, the country’s largest wholesale and retail bank. The three foreign firms jointly purchased a 10 percent stake in ICBC for US$3.78 billion, with Goldman Sachs spending US$2.58 billion for a 7 percent interest.
The deal came at a transformative and challenging time in the Chinese financial sector. There was widespread agreement that a restructuring of the banking system was necessary if rapid economic growth were to continue. More than a capital infusion, the ICBC investment underpinned a deep strategic collaboration in which Goldman Sachs would advise the bank across seven key areas: corporate governance, risk management, capital trading, asset management, corporate and investment banking, non-performing loan management, and staff training.
Coming two years after Goldman Sachs had created a domestic securities company in China, Goldman Sachs Gao Hua Securities Company Limited, the ICBC partnership would prove instrumental in the identification of new clients and business opportunities for Goldman Sachs and deepening the firm’s presence in this growing and important global market.