ICBC pins profit hopes on merger

Next step in lender's consolidation will be integration of credit-card businesses

ICBC (Asia) expects its merger with Belgian Bank to speed up a goal of increasing return on equity to 15 per cent from 11.4 per cent.

While chief executive Zhu Qi did not specify when the target would be achieved, he was confident return on equity would reach 15 per cent in three to five years.

The bank also expected the cost-income ratio would be reduced to below 40 per cent from about 45 per cent now.

ICBC bought Belgian Bank - Fortis Group's retail and commercial banking business formerly known as Fortis Bank Asia HK - in a deal that was finalised on Monday.

Mr Zhu said the bank's next priority was to inject the credit-card business owned by the Hong Kong branch of its parent firm, Industrial and Commercial Bank of China, into ICBC (Asia).

He said the bank was in the process of appointing a financial adviser to examine the issue and to evaluate the parent firm's card business in Hong Kong. He hoped the transaction could be completed as quickly as possible.

ICBC (Asia) has issued 30,000 cards, while its parent company has 100,000 cards in issue in Hong Kong.

Mr Zhu expected the card business to become profitable if the card business of the two firms, integrated as ICBC (Asia), could cross-sell retail banking services to the parent firm's cardholders, strengthening retail banking and yielding economies of scale.

Mr Zhu also expected the bank to benefit from its parent firm's shareholding restructuring, which is expected to be complete soon. He said the bank would have even better support from the parent firm, which would boast an improved financial structure after the re-organisation.

Fortis holds a 9 per cent stake in ICBC (Asia), Mr Zhu said. He explained that the lock-up period for the share purchase had expired, but that Fortis still intended to co-operate with ICBC (Asia) on a long-term basis.