Chinese banks fuel expansion overseas in succession due to a profit slowdown rooted from the domestic economic downturn.
For an example, Bank of Communications (BoCom, SEHK: 3328 and SHSE: 601328), the fifth-biggest commercial lender in the country, established an asset custody center in Hong Kong at the end of March this year, becoming the first Chinese bank to set up an asset custody center overseas. On February 27, China Everbright Bank (SHSE: 601818), the banking unit of conglomerate China Everbright Group, saw the Hong Kong branch start formal operation. Almost in the meantime, Industrial Bank (SHSE: 601166), a Fujian-based joint-stock lender, gained approval from the China Banking Regulatory Commission (CBRC), the top Chinese banking regulator, to make preparations for the establishment of a branch in the SAR. In late January, Industrial and Commercial Bank of China (ICBC, SHSE: 601398, and SEHK: 1398), the biggest commercial lender in the country, set up a subsidiary in Sao Paulo, the biggest city in Brazil. China Construction Bank (CCB, SHSE: 601939, and SEHK: 0939), the biggest real estate and mortgage lender in the country, said that it was accelerating preparing for the establishment of a subsidiary in Dubai and Russia as well as a branch in Toronto, Osaka, San Francisco, Luxembourg and so on.
Listed Chinese banks have completed releasing financial results for the first quarter of this year and according to the results, their profitability overseas continued strengthening. For instance, CCB saw the outstanding of both loans and advances overseas reach CNY 543.5 billion as at March 31, compared to about CNY 393.9 billion as at the end of last year. BoCom witnessed profit reaped overseas in the three months hit about CNY 1.25 billion, compared to CNY 796 million a year ago.
In addition to establishing a branch or a subsidiary, they fueled expansion overseas through launching a list of mergers and acquisitions (M&As).
Zeng Yijing, an analyst with leading global credit rating agency Standard & Poor's, pointed out that there were three major reasons for Chinese banks to fuel expansion overseas. Firstly, Chinese companies expanded fastly overseas and the demand for banking services rose largely as a result. Secondly, liquidities in the Chinese market was rich owning to pretty trade surplus. And lastly, internationalization of the Chinese yuan urged them to fuel expansion overseas.
People in the circle stressed that it should be a sharp slowdown in profit rooted from the domestic economic downturn as well as fiercer competition locally that jointly caused them to fuel expansion overseas.
