Bank of East Asia on the mainland acquisition trail
Bank of East Asia, Hong Kong's fifth-largest bank, has mapped out a long-term business strategy by which its aims to boost its mainland returns by 40 per cent and its overseas returns by 15 per cent over the next 10 years.
Chairman David Li Kwok-po said that apart from organic growth, the bank would continue to look for acquisition opportunities in the mainland and overseas.
He added that BEA saw some benefit to closer links with mid-tier banks in Hong Kong - either through business co-operation or even through mergers.
BEA posted a record profit of HK$1.57 billion in the first six months of the year, a 32.3 per cent jump from a year ago, partly due to an 80 per cent surge in its mainland pre-tax profit to HK$284 million.
The mainland accounted for 15.4 per cent of group profit and overseas operations for 11.8 per cent.
Mr Li said the profit contribution from both mainland and overseas operations would grow in the next 10 years while Hong Kong's contribution could shrink to 35 or 40 per cent from the current 72.8 per cent. 'I don't see too much room for expansion in a mature Hong Kong market,' he said. Our emphasis is on the mainland.'
Although BEA already derives a decent profit from its 27 mainland branches, Mr Li said it would pursue expansion through acquisitions.
BEA has held equity investment talks with a number of mainland banks, so far without success, though the chairman said there was a good chance of an acquisition before the end of this year.
'We recently rejected two offers from mainland banks within 48 hours,' said Mr Li, explaining that the prices were too high.
He said the target banks had to meet BEA's criteria in such areas as corporate governance and that BEA insisted on being the only foreign partner.
With the mainland financial markets due to be fully opened by year-end under World Trade Organisation agreements, it is widely expected that foreign banks will be able to open branches without restrictions, provided they are locally incorporated.
'The price of city commercial banks will go down' as a result, Mr Li said.
BEA aims to become the first foreign bank to incorporate its mainland business in China to enjoy equal treatment with its local counterparts once the related regulations have been passed.
Meanwhile, the bank has its sights set on expanding overseas, everywhere from Southeast Asia to the United States and Europe through equity investment or co-operation with local strategic partners.
'Our strategy is to serve Chinese wherever they are, linking them to Hong Kong and China,' Mr Li said.
The bank currently has 15 operations in the US and six in Canada, as well as a presence in Singapore and Malaysia and a joint-venture bank in Indonesia.
Thailand and Vietnam are also on its radar.
As for Hong Kong, Mr Li said BEA would like move closer to other mid-tier lenders, such as Wing Hang Bank and Wing Lung Bank.
Such a move could be through co-operation or through a partnership.
Any family owners who sell a stake in a bank to BEA would be able to retain a stake in the new entity and see their name preserved.
'The most important is that we have at least a 50.1 per cent stake,' he said.
Mr Li, who is 67, said he had no plans to retire in the next two years.