Goldman to keep 80% of ICBC stake û for now

Goldman Sachs has committed to keep at least 80% of its 4.93% stake in Industrial and Commercial Bank of China (ICBC) until the end of April next year, according to a joint statement by the two firms last night. This agreement comes after widespread speculation that the US investment bank may be about to sell half its stake next month and use the funds to pay back the money received under the US government's Trouble Asset Relief Program (Tarp).

In fact, ICBC's Hong Kong-listed shares have underperformed both the benchmark index and the other state-owned Chinese banks that trade in Hong Kong this year, partly because a potential sale by Goldman has acted as an overhang on the stock. Under the original lock-up agreement, Goldman would be free to sell half of its investment in ICBC, which it made before the initial public offering in October 2006, from April 28 this year and the other half from October 20.

At current market prices, the entire stake is valued at approximately HK$58.9 billion ($7.6 billion), and half of that would no doubt have been a welcome cash infusion in the current environment. However, even though Goldman paid only $2.58 billion for the entire stake in April 2006, it would not have be able to book a profit at current levels since the position is held on a mark-to-market basis. In fact, Goldman has been booking losses on the position as ICBC's share price has halved from its peak in October 2007.