Bank of China

Wing Hang keeps eye out for targets

PUBLISHED : Monday, 05 September, 2005, 12:00am
UPDATED : Monday, 05 September, 2005, 12:00am

Bank keen to expand further in Macau and on the mainland by buying lenders with comparable assets

Boosted by its successful takeover of Chekiang First Bank two years ago, Wing Hang Bank is ready to look for more acquisitions, according to its chairman and chief executive.

'We will seriously consider [acquisitions] if opportunities arise, both in the mainland and in Macau,' Patrick Fung Yuk-bun said, adding the bank aimed to diversify its business with a particular focus on the Pearl River Delta, including Hong Kong and Shenzhen.

As it waits for potential targets to come along, Wing Hang Bank has also mapped out a plan for organic growth, including strengthening its presence on the mainland by choosing Shenzhen as an operations hub and opening more sub-branches in the hope that it can replicate the success it had in Macau.

Given the fast-growing economies on the mainland and in Macau, the bank expects its loan business in both markets to account for 25 per cent to 30 per cent of its total loan portfolio in three years, from the current 20 per cent.

'I hope the proportion of our profit contribution [from the mainland and Macau] will be similar - accounting for 30 per cent [of group profit] in three years,' Mr Fung said.

Wing Hang hopes to open its first sub-branch in Shenzhen later this year, with the eventual expansion of the network to eight to 10 sub-branches.

'I believe this will enhance our economies of scale,' he said.

The group has a branch each in Shenzhen and Shanghai and representative offices in Beijing and Guangzhou.

Mr Fung said the bank could look forward to a leap in profitability if it could make the Shenzhen business as successful as that in Macau, where it owns Banco Weng Hang.

Established in 1941, Banco Weng Hang has 11 branches, which accounted for 12 per cent of the group's $836 million pretax profit for the first half of this year.

Although official numbers have not been released, Mr Fung said the mainland operations had been profitable. He said the pace of growth would be slow if the bank had to rely mainly on opening its own branches on the mainland.

Hence, acquisitions would be the best path to expansion. Ideal takeover targets would be city commercial banks with assets similar in size to those of Wing Hang.

Acquisitions outside Hong Kong would be a challenge, given the different markets and regulatory environments, he said. 'So the bank will have to be more careful.

'If there was any acquisition [in Macau], it would be more likely a merger, wherein the buyer and seller are both engaged in the same business, which is useful in realising synergies.'

He said the Chekiang First Bank acquisition was one of the major reasons Wing Hang recorded a strong interim profit of $700 million for the first half, up about 30 per cent from the same period last year.

The bank could enjoy cost savings of $80 million for the full year because of the purchase, Mr Fung said, adding that it could generate even more revenue from the expansion of the customer base.

He believes the Macau unit will continue to perform well even without further acquisitions, because of the strong business it has managed to build up over the past 60 years.

While mapping out its expansion for the mainland and Macau, Mr Fung said Wing Hang would continue to diversify its business in Hong Kong by strengthening its consumer-lending business and opening more branches, for example.