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Mainland banking giant Industrial & Commercial Bank of China (ICBC) plans to inject its Hong Kong branch commercial banking business into locally listed unit, ICBC (Asia), in a deal valued at HK$3 billion.

The bulk of the price-tag, or HK$2.12 billion, will be settled through the issue and allotment of new ordinary shares and convertible preference shares by ICBC (Asia) to its mainland parent.

A further HK$580 million will be paid from the issuance of subordinated debt due to ICBC, and about HK$300 million will be paid out in cash from ICBC (Asia) resources.

'Following the restructuring, ICBC Asia will become the flagship of ICBC's banking business in Hong Kong,' the company said last night.

'ICBC (Asia)'s long-term strategic objective is to become one of the leading commercial banks in Hong Kong in terms of assets, either through organic growth or selective acquisitions.'

The long-awaited move by ICBC to restructure its Hong Kong assets falls short of a wider objective of including investment banking operation ICEA Securities under the new single umbrella.

ICEA, which has made its mark on the local investment banking scene with several Growth Enterprise Market listings, is at present engaged in bringing new candidate Xinao Gas Holdings to the market.

ICBC holds 60 per cent of ICEA, Bank of East Asia holds 25 per cent, and the balance is held by management after a buy-out of former owner Natwest Markets.

Also left out of the consolidation plan is ICIC, a finance operation run by the group.

In returns filed with the Hong Kong Monetary Authority last September, ICBC disclosed that its branch had deposits of HK$3.9 billion as of June 30 last year, and customer advances of HK$5.8 billion.

Total assets amounted to HK$11.76 billion.

By comparison, ICBC's mainland operation reported assets of HK$3.3 trillion as at the end of 1999, which was generated from a lending network of 30,000 branches.

Total pre-tax earnings from the mainland's biggest bank amounted to a record 5.06 billion yuan last year.

A minnow by comparison with its mainland parent, the Hong Kong branch will now be injected into the 21-branch operation of ICBC Asia (formerly known as Union Bank), as the first step towards establishing a secure foothold for ICBC in the Hong Kong market.

In line with that strategic plan, ICBC last year acquired the 52.3 per cent stake held in Union Bank by China Merchants Holdings and went on to build that stake to 70.9 per cent following a general offer to remaining shareholders.

Renamed ICBC (Asia), the former Union Bank bounced back into the black under its new management, reporting a consolidated after-tax profit for last year of HK$150 million.

ICBC (Asia)'s net interest income for the year rose 35 per cent to HK$434 million.

Its net interest margin widened from 1.68 per cent in 1999 to 2.21 per cent.

The bank put the improved operating performance down to a new loans policy and investment in 'high quality debt instruments'.

Commenting on the results, released on February 27, ICBC (Asia), chairman Jiang Jianqing said: 'Being a subsidiary of the Industrial & Commercial Bank of China, ICBC (Asia) enjoys a unique advantage over its competitors with the backing of its parent bank's vast resources and networks.

'It is also the expressed intention of ICBC to foster ICBC (Asia), in becoming its key flagship in the Asia-Pacific region.'



ICBC unveils plans for $3b injection