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)