China Construction Bank

CCB will follow its clients to overseas markets

PUBLISHED : Tuesday, 20 November, 2012, 12:00am
UPDATED : Tuesday, 20 November, 2012, 3:51am

China Construction Bank, the mainland's No 2 bank by assets, plans to parlay its overseas operations into a global bank by 2015.

Zhang Jianguo, president of the Beijing-headquartered bank, said that besides building on its network in the United States, Europe and the Asia-Pacific region, the bank would consider expanding through mergers and acquisitions.

Zhang told the South China Morning Post in a written response to questions that the "top priority of overseas M&As" will be emerging-markets, where many Chinese companies are going to do business and where "these countries should have a good trade relationship with China".

But he said that any M&A by China Construction Bank, or CCB, one of the mainland's Big Four state lenders, would be done cautiously.

"Of course, we will also pay attention to investment opportunities in Europe and North America, in particular if some European and American institutions plan to sell their branches and businesses in emerging markets," Zhang added.

As the euro-zone debt crisis deepened this year, there is growing speculation that China's capital-rich Big Four banks could take the rare chance to acquire some European rivals.

In September, Britain's Financial Times quoted CCB chairman Wang Hongzhang as saying that the bank could spend as much as US$15 billion, or about 94 billion yuan, to acquire a major stake in a European bank or even buy it out.

If successful, a deal of that size would become China's largest banking acquisition abroad.

CCB later denied it was interested in pursuing such a big investment abroad, citing a "misunderstanding" in the Financial Times article.

Zhang told the South China Morning Post that the starting point for the bank's overseas expansion is to follow its clients.

"To go with them and provide banking services to them in those new local markets they are expanding into is the key goal for CCB's overseas expansion strategy," he said.

He also noted that CCB would pay attention to and evaluate all risks when expanding abroad.

Zhang did not give an estimate of how much the bank planned to spend on the acquisitions.

In a recent research note by British bank Barclays, analysts said CCB could afford an overseas investment with a cash consideration of between 50 billion yuan and 150 billion yuan.

Other big Chinese banks also aim to expand their operations outside the mainland.

Industrial and Commercial Bank of China (ICBC), the biggest of the mainland's Big Four, has received approval from Argentina's central bank to acquire 80 per cent of commercial lender Standard Bank Argentina, making it the first Chinese lender to enter Latin America's third-largest economy.

Analysts said CCB, which is the mainland's top property lender, has relatively sound capital which gives the bank more room to make significant investments.

At the end of September, CCB's tier one capital adequacy ratio stood at 11.35 per cent, the highest among the Big Four banks.

The tier one ratio of the other three, ICBC, Bank of China and Agricultural Bank of China, were between 9.76 per cent and 10.51 per cent.