A key feature of China's banking industry development last year
has been waves of overseas expansion by China's commercial
banks.
As of December 11, 2006, the protective period for Chinese banks
following China's entry into the World Trade Organization (WTO)
came to an end, and China's financial industry fully opened.
In the meantime, domestic banks started expanding overseas by
launching initial public offerings (IPO) offshore, acquiring
foreign financial institutions and opening overseas branches. Here
are the major events in 2007:
I. Overseas listing:
China CITIC Bank's dual listing
China CITIC Bank simultaneously listed in the Chinese mainland
and Hong Kong stock markets. The bank accepted public bidding in
Hong Kong between April 16 and 19, for its 4.88 billion H shares.
It raised HK$28.63 billion (US$3.67 billion), a record in terms of
funds raised by IPOs in Hong Kong.
Bank of China (BOC) launched the country's first A- and H-share
dual listing in Shanghai and Hong Kong in June 2006 and the
Industrial and Commercial Bank of China (ICBC) was listed in a
similar style in October this year, raising a world record high in
funds. Still, CITIC Bank's dual listing was a milestone as the
first shareholding commercial bank to do so.
As the largest subsidiary of CITIC Group, China CITIC Bank had
70.68 billion yuan (US$9.64 billion) total assets by the end of
last year, the seventh largest bank in China. In terms of deposit
balance and international trade settlement volume, it ranked second
among the China's national commercial banks. CITIC Bank developed
its comprehensive services platform with unique advantages, as a
direct beneficiary of the organic cooperation between subsidiaries
of the Group.
II. Overseas acquisition:
CDB's buying into Barclays
On July 23, China Development Bank (CDB) and Barclays sealed a
share purchase and strategic cooperation agreement.
Under the deal, on August 14 CDB initial investment of US$3
billion in Barclays for a 3 percent stake in the British banking
giant, at 7.2 British pounds apiece, facilitated Barclays' bid for
ABN Amro against a consortium led by Royal Bank of Scotland. CDB
was able to send a director to Barclay's board.
If Barclays' bid for ABN Amro goes through, CDB will further
invest between US$8 and US10.5 billion in Barclays and raise its
holdings to over 5 percent.
Under the partnership, Barclays will assist and advise CDB as it
evolves into a commercially operated financial institution, the
first of China's three policy banks. It will provide CDB expertise
and advice in such fields as risk management, corporate governance,
and information technology strategy and procurement.
Sources with CDB said the event was one of the most important
steps as the bank commercializes. If the deal is completed as
planned, CDB's Barclays purchase will be the country's largest
outbound investment by a Chinese enterprise to date.
ICBC acquires Seng Heng Bank
ICBC on August 29 paid US$586 million to buy a 79.93-percent
stake of Seng Heng Bank, Macao's third largest commercial bank in
terms of total assets. It has nine branches in the special
administrative region and provides a variety of financial services
including corporate and personal finance. Statistics showed that by
the end of 2006, the Macao lender's assets totaled 25.39 billion
patacas (US$3.17 billion).
ICBC would strengthen risk management of the lender and run the
bank in strict accordance with both Chinese mainland and Macao's
laws in order to promote local economic development. ICBC could tap
into the Macao banking market through the purchase, the second
after its buyout of PT Bank Halim Indonesia.
Mingsheng purchasing UCBH Holdings shares
China Minsheng Banking Corp announced on October 8 that it had
reached an agreement with UCBH holdings to buy news shares of the
American bank in three phases for between US$212 million and US$317
million. After the purchase, Minsheng held a 4.9-percent stake in
UCBH Holdings.
Minsheng would purchase shares, acquiring 4.9 percent of UCBH by
purchasing 5.4 million shares in the first phase. It will further
increase its stake to 9.9 percent in 2008. Investment for the first
two phases would cost Minsheng a total of US$2.5 billion. And
finally, it may increase its holding to 20 percent by June 2009 to
become UCBH's biggest single shareholder.
The deal marked the first strategic investment in a banking
institution in the United States by a Chinese mainland bank. UCBH
Holdings is the holding company of United Commercial Bank, a
leading bank in the US serving Chinese communities and American
companies doing business in China.
Founded in Los Angelus in 1998, UCBH Holdings is currently
listed on the NASDAQ exchange and has 51 branches and loan centers,
mainly in California and other major US cities. It also has a
branch in Hong Kong and representative offices in Shanghai,
Shenzhen and Taiwan Province.
ICBC buying Standard Bank stake
ICBC on October 25 said it would spend US$54.6 billion to take a
20 percent stake in Standard Bank Group Ltd, Africa's largest bank,
and become its largest shareholder.
ICBC took new shares issued by Standard Bank, accounting for 10
percent of the enlarged share base at 104.58 rand, and another 10
percent shares from other shareholders at 136 rand apiece.
The deal is ICBC's third overseas investment in less than a year
and the first in Africa. The two sides also planed to initiate a
US$1 billion global resources fund to investment in
resource-related sectors such as mining and natural gas.
Trade between China and the African continent swelled 40 percent
last year to US$55.5 billion, making China Africa's third largest
trading partner. South Africa-based Standard Bank has 951 branches
in 18 African countries and over 100 units outside the continent.
Over half of the bank's profits come from non-interest income as a
result of diversified businesses, which would help the Chinese
lender in expanding a comprehensive business other than retail
banking.
Following the stake purchase, ICBC has the right to nominate two
members to Standard Bank's board, with one of them becoming
vice-chairman.
III. Overseas branch opening
BOC entering Netherlands
On July 26, BOC celebrated with an opening ceremony for the BOC
(Luxembourg) SA Rotterdam Branch in Netherlands, its first branch
in that country. The Rotterdam branch had been operating on a trial
basis since June 18. It mainly serves Chinese enterprises in
Netherlands, overseas Chinese and Dutch companies doing business
with China.
BOC Luxembourg was founded in 1979 as one of the earliest
overseas Chinese bank branches and the first following 1978 reforms
when China started to opening up to the outside world.
BoCom setting up Macao, Europe branches
On October 22, Bank of Communications (BoCom) announced the
opening of its Frankfurt branch in Germany, its first in Europe,
which made BoCom the fourth Chinese bank stepping into the city
following BOC, ICBC and China Construction Bank (CCB).
Analysts said the setup of Frankfurt branch not only filled up
the blank space for BoCom in Europe, but turned out to be a key
component of the bank's 24-7 foreign exchange operating system as a
euro settlement and clearance center, together with its Shanghai
and New York operations.
On November 1, the BoCom Macao Branch started operations. The
Macao branch is another important step in BoCom's "rooted in Asia"
strategy. As of then, BoCom had already set up over 50 operating
units globally, covering the world's busiest economic hubs such as
Hong Kong, Macao, Tokyo, Seoul, Singapore, New York, London and
Frankfurt. The number of its first-level overseas banking
institutions is expected to reach 15 by 2010, sources said.
CMB approved for New York Branch
On November 8, China Merchants Bank (CMB) was cleared by the
Federal Reserve Board to open a branch in New York, the first by a
Chinese lender since 1991.
CMB had opened a representative office in New York in October
2002 and applied in January this year to open a branch there. The
nation's six-largest commercial bank had also opened its Hong Kong
branch in August 2002.
ICBC followed with its own application in April, and CCB said it
planed to follow with its own bid. Currently BOC is the only
Chinese bank with a branch in the US.
(Chinadaily.com.cn January 3, 2008)
