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SCMP Reporter

Guangdong Development Bank (GD Bank), which has made the first acquisition in China's financial industry, is capitalising on the extensive business network of the company it bought, Zhongyin Trust and Investment Corp (ZYTIC), for faster expansion.

  The bank opened six branches in the first four months after it took over Beijing-based ZYTIC from the People's Bank of China (PBOC) in October.

  The new branches are in Beijing, Shanghai, Dalian, Nanjing, Hangzhou and Kunming - all beyond its home base in Guangdong province.

  Executive vice-president Wang Xin said the locations were chosen because ZYTIC had strong asset exposure and client bases in those centres.

  The PBOC approved the buyout on October 5, ending a year of administrative custody by the bank of the trust and investment firm, which went broke in October 1995 because of poor management and performance.

  The takeover was the first of its kind in China as well as the largest in value at that time.

   Sources said that the acquisition was an administrative order from the PBOC, which sought to avoid an adverse impact on China's fledgling financial market and to protect the interests of creditors.

  GD Bank's official line was that the purchase would allow it to use ZYTIC's strong presence for expansion. 'The acquisition is a big leap forward in China's financial reform because it marks a precedent for a commercial bank like GD Bank to acquire an investment and trust company,' Mr Wang said.

  He did not expect ZYTIC to generate profits over the next three years because most of its operations were non-performing before it was declared bankrupt.

  ZYTIC's 16 branches in the mainland, Hong Kong and Singapore are its major attraction. Mr Wang said GD Bank had completed taking over ZYTIC's business in China and its next step was to acquire its offshoots in Hong Kong and Singapore.

  'ZYTIC has many finance and investing ventures with Hong Kong companies. We want to use this as a base to expand our business in the territory, but it is subject to PBOC approval.'   GD Bank, established in 1988, with the Guangdong provincial government as the largest shareholder, is the most aggressive among China's 13 regional commercial banks in terms of branches, deposits and lending.

  It is seeking to be the first mainland regional bank to have a fully licensed branch in Hong Kong. It applied to the PBOC last year to upgrade its representative office, opened in 1995, into a branch.

   Its total assets, at about 70 billion yuan (about HK$65.1 billion) at the end of last year, are far below the Hong Kong Monetary Authority's requirement of at least US$16 billion in assets for a foreign bank to set up a branch.

  It also is planning to establish a non-banking business, such as an investment or financing firm, in Hong Kong.

  Mr Wang expected the bank's assets to increase by 10 billion yuan this year, half through an internal expansion and half from ZYTIC assets that will be reflected on its balance sheet this year.

   He said GD Bank had net profit of 600 million yuan in 1995 but did not give a figure for last year, saying only it was favourable.

  Last year the bank's deposits rose about 20 per cent, from 1995's 30 billion yuan, and loans added 18 per cent from the previous year's 29 billion yuan.

FINANCIAL LEAP FORWARDGD Bank makes history with takeover of trust and investment firm ZYTIC Plans to be first regional bank with fully licensed HK branch 



GD Bank counts on new network