New York will be home to a new branch of China Merchants Bank Co (CMB), which recently received the regulatory go-ahead to open its first banking arm overseas.

 

CMB, one of the country's leading joint-stock banks, said it seeks to boost brand awareness ahead of its planned listing in Hong Kong.

 

The Shenzhen-based lender will upgrade its representative office in New York to a branch that can offer lending and deposit services, it said in a statement to the Shanghai bourse yesterday.

 

China's biggest lenders, including Industrial and Commercial Bank of China and Bank of Communications, are expanding overseas to diversify income and improve profitability as an increasing number of foreign banks have entered the domestic banking sector and eroded profit margins.

 

According to China's commitment to the World Trade Organization, foreign lenders are allowed to run RMB businesses from the end of this year, posing a major threat to domestic players.

 

As part of its global expansion plan, China Merchants Bank is also looking for acquisition opportunities to tap into the Hong Kong market.

 

Qin Xiao, chairman of the bank, told China Daily that his bank is "interested" in entering the international financial hub and buying small and medium-sized local banks.

 

"The bank we would like to take over does not need to boast huge assets," said Qin. "We pay more attention to its network, business and growing potentials. And we are also concerned if we can take the controlling stake."

 

However, Qin does not think there are many acquisition opportunities in Hong Kong, as most local lenders are not willing to sell stakes.

 

"We haven't entered into negotiations with Hong Kong lenders yet," said Qin. "Our acquisition plan depends on opportunities and price."

 

Other Chinese lenders, such as China Minsheng Banking Co and China Construction Bank, are also keen to enter the Hong Kong market. Both of them wanted to buy the Asia Commercial Bank, which has 12 branches in Hong Kong, a branch in Shenzhen and representative offices in Shanghai and Shenyang. Asia Commercial Bank was eventually bought by a Malaysian bank for HK$4.5 billion (US$592 million) last month.

 

To fund expansion, CMB will continue to get funds from the capital market. "We will wait for a good time to float H shares in Hong Kong," Qin said. "But the main purpose is not raising money but improving cooperating governance with a more strict supervisory environment after the listing."

 

According to KPMG, an accounting firm that has done annual auditing for CMB for several years, the bank is not likely to be listed in Hong Kong this year.

 

(China Daily March 9, 2006)