Minsheng makes profitable Hong Kong start
The Hong Kong branch of the nation's largest privately owned bank made a profit after just nine months of operations, helped by mainland enterprises looking to go global.
Many mainland bank operations in Hong Kong took at least three years to see a profit, said Lin Zhihong, chief executive of China Minsheng's Hong Kong business, which made a net profit of more than HK$100 million at the end of last year. It completed a year this March.
According to Lin, the branch's earnings are not that important for Minsheng, which posted a net profit of 37.56 billion yuan (HK$47 billion) last year.
"Setting up a branch in Hong Kong was to expose our state-oriented operation to the free-market environment in Hong Kong in order to prepare ourselves for internationalisation," Lin said at his Bank of America Tower office in Central. Instead of setting up a locally incorporated subsidiary, which would require a standalone balance sheet and capital requirement, Minsheng chose to start a branch in Hong Kong.
The branch has about 1,000 corporate clients, most of them privately owned mainland enterprises in the city, Lin said, adding that it has no plans to go for local incorporation.
Lin said that after a year in Hong Kong, the bank was moving to the "second stage of development", exploring the market in Southeast Asia using Hong Kong as the regional base.
"Many of our customers are looking for business opportunities in Southeast Asia, so we want to follow in their footsteps and provide the service," he said, adding the bank is particularly interested in Singapore, Thailand and Indonesia.
The Hong Kong branch, which was set up in March last year, has 120 staff and aims to increase the headcount to 500 in three to five years.
It had deposits of HK$27 billion and assets of HK$40 billion at the end of April. Lin said he expected assets to surpass HK$100 billion in five years and did not rule out the possibility of acquisitions in future.
The branch's net interest margin, a measure of profitability, stood at 3 per cent at the end of March. It is lower than the 3.5 per cent average for mainland banks because of the freer liquidity flow and greater competition for loans and deposits in Hong Kong, he said.
Lin said Minsheng aimed to set up an investment banking arm this year in Hong Kong. "We are awaiting approval from the regulator on the mainland. We will then apply for a licence in Hong Kong," he said, adding that he expected the regulatory approval to come soon.