* Regulatory risks seen a concern for investors
* ICBC says Goldman remains strategic partner
* ICBC HK shares drop 3 pct to 3-week low
* Goldman upsized sell-down - term sheet (Adds details of stake sale, analyst quotes, share price)
By Victoria Bi and Sui-Lee Wee
SHANGHAI/HONG KONG, Sept 30 (Reuters) - Goldman Sachs' $2.3 billion stake reduction in ICBC comes amid a shaky outlook for the Chinese lender, whose shares have slumped this year with no immediate signs of a comeback.
Industrial and Commercial Bank of China attempted to build confidence on Thursday, saying the Wall Street titan remained a strategic partner.
The sale comes after a lock-up restriction expired in April and after a roughly 10 percent decline in ICBC's stock this year, underperforming Hong Kong's benchmark Hang Seng Index, which has risen about 2 percent.
Regulatory risks, coupled with ICBC's upcoming rights offering, also underscore the factors behind Goldman's selldown, which is expected to continue in chunks over the next few years, having sold down $2 billion stakes twice in the last 16 months.
Chinese regulators could raise the minimum amount banks must keep in reserve against future losses to 15 percent from 10 percent now and investors fear such a move could prompt another round of fundraising, said Patrick Pong, analyst with Mirae Asset Securities.
"Potentially, there could be some more disposals next year," said Pong of Goldman's ICBC stake. "If you look at the fundamentals of ICBC, there are some issues with the outlook."
Goldman's sale cuts its stake in ICBC to around 3 percent from 3.9 percent. German insurer Allianz Group and U.S. credit card company American Express also have significant stakes in ICBC.
On Thursday, Hong Kong-listed shares of ICBC fell 3 percent to HK$5.79, a three-week low. It was the second-biggest loser on the benchmark Hang Seng Index, which was flat.
The world's largest bank by market capitalisation was the most actively traded stock in Hong Kong, with 530 million shares changing hands at 2.3 times their 30-day average.
"The overhang on the stock will continue. There are some policy risks," said Mirae's Pong, adding, however, that ICBC's valuation looks attractive on a price-to-earnings and price-to-book basis.
STRATEGIC PARTNER
The stake sale -- the second for Goldman after one in June 2009 -- comes ahead of ICBC's upcoming rights offering, in which shares will be sold at a discount and will dilute the holdings of existing shareholders.
The 2.75 billion shares that were being sold as of Wednesday were priced at HK$5.70-HK$5.79 each, a 3-4.5 percent discount, according to a term sheet obtained by Reuters.
The offering was upsized to 3.04 billion shares, which was quickly snapped up at a 3.9 percent discount of HK$5.74 per share, according to another term sheet obtained by Reuters on Thursday.
ICBC said on Thursday there was no change to its strategic partnership with Goldman, which, along with ICBC International Capital, served as a financial adviser to ICBC in the privatisation of its Asia unit in August.
The ICBC investment for Goldman has been hugely profitable. The value of Goldman's stake before the share sale was more than $10 billion, well above the original $2.58 billion the New York investment bank invested in 2006, when the Chinese bank was just coming off a government bailout and was about to go public.
After the sale, Goldman still holds 10.4 billion shares in ICBC.
Early in 2009, Goldman pledged to keep 80 percent of its ICBC stake until April 2010. Under an earlier lockup agreement, Goldman would have been permitted to sell half of its stake in the state-controlled bank in April 2009 and the rest that October. (Additional reporting Soo Ai Peng in SHANGHAI; Editing by Chris Lewis and Muralikumar Anantharaman)