Bank of China plans to be more aggressive in overseas operations this year, mainly by arranging syndicated loans to help mainland enterprises fund expansion and offer much-needed cash flow to quality overseas companies squeezed by the global credit crunch.
'The global economic slowdown and tightened credit market have pushed earnings from financing to a very good level,' BOC chairman Xiao Gang said yesterday, adding the bank was 'in a very good position to cash in on this situation' by expanding its financing operations overseas.
Mr Xiao was speaking on the sidelines of the bank's launching of its investment management house.
The bank will work with domestic and Asian financial institutions primarily to provide financing.
After going public in the past few years, mainland commercial banks are flush with cash.
However, worries about excessive money supply prompted the central government to last year limit banks' domestic lending.
As a way out, mainland commercial banks started reaching out globally to utilise their cash hoard, a move that only eased slightly as the global has economy slowed.
BOC set up centres in Hong Kong, Paris and New York last year to better co-ordinate investment at its 660 overseas branches.
'All investment decisions will be made collectively by these three centres rather than individually, as was the case in the past. This will offer us a great chance to lead loan syndication,' Mr Xiao said.
'I really think we are going to go big in the sector this year.'
BOC deputy president Wang Yongli said in a separate interview a certain amount of the syndicated loans provided mainly by mainland banks would go to domestic businesses for their global expansion.
The bank would also invite commercial banks from Asian countries, which have been less affected by the subprime credit crisis in the United States, to invest in projects overseas.
'We will try to be the organiser of such syndicated loans,' Mr Wang said. Where the return is attractive, BOC may also invest in battered US financial institutions.
'In general, I do not rule out any opportunities overseas because, as a bank, our goal has always been to pursue the maximum possible return from our funds,' he said.
As the country's foreign-exchange bank, BOC has the highest foreign currency reserves and direct exposure to overseas markets. Its share price has taken a beating recently following media reports that it had billions of dollars exposed to the US subprime market.
Mr Xiao insisted the bank had enough provisions to offset losses in the sector and was expected to report 'a clear increase in profit' for last year in its annual report due next month.
He said the bank was well positioned to benefit from the increasing need for loans in foreign currencies this year.