Bloomberg News

ICBC Sees Hong Kong Retail Unit Growing as Yuan Role Expands

August 06, 2012

ICBC (Asia) to Challenge Hong Kong Big Banks in Retail Banking

ICBC made its first overseas acquisition as early as in 2000 when it paid $231.5 million for control of Union Bank of Hong Kong Ltd., which is ICBC (Asia) today. Photographer: Nelson Ching/Bloomberg

Industrial & Commercial Bank of China Ltd. plans to expand its Hong Kong retail bank by 15 percent to 30 percent annually in the next three years as China’s yuan becomes more widely used in the city.

“We want to transform ourselves into a large-scale lender, from a midsized bank,” Ying Weiyun, assistant chief executive of Industrial & Commercial Bank of China (601398) (Asia) Ltd., said on Aug. 3. “If the yuan gains equal importance with the Hong Kong dollar in five or 10 years, we will have a chance.”

The four closest mainland rivals of parent company ICBC, the world’s most valuable lender, have also set up operations in Hong Kong, a gateway from China to the international banking market. The city has emerged as the first offshore hub for trade in the yuan as China’s government seeks to promote its use in international commerce and investment.

Ying, 42, said the 15 percent to 30 percent expansion goal refers to indicators such as assets and branches. ICBC (Asia) plans to add eight branches and hire more than 100 people by the end of next year, expanding its network in the city to 60 and employees in its outlets to more than 700, he said.

The bank had total assets of HK$405 billion ($52 billion) for all of its businesses at the end of last year.

Market Dominance

Hong Kong’s banking market is dominated by Bank of China Ltd. unit BOC Hong Kong (Holdings) Ltd., HSBC Holdings Plc (HSBA) and Standard Chartered Plc, which issue the city’s banknotes. Together with Hang Seng Bank Ltd. (11), controlled by HSBC, the lenders had a combined 68 percent of outstanding home loans in July, according to mReferral Mortgage Brokerage Services.

ICBC, China’s largest bank, and China Construction Bank Corp. (939), the second-biggest, are “relatively new here” compared with Bank of China, the No. 3 lender on the mainland, said Ronald Wan, a Hong Kong-based managing director at China Merchants Securities Co.

“They have a chance to grow big, but the Hong Kong market is competitive,” he said. “While they are growing, the other banks are also growing. They won’t stop and wait for you.”

ICBC (Asia) seeks to bolster revenue by winning cross- border business and serving private banking clients with more than HK$10 million in assets, Ying said.

Options traders have cut bearish wagers on parent ICBC to the lowest in 19 months on speculation earnings at the world’s most profitable lender will increase as the Chinese government acts to boost growth. The ratio of outstanding puts to sell ICBC versus calls to buy dropped to 1.12-to-1 on Aug. 3 and touched 1.08 on July 27, the lowest level since December 2010, according to data compiled by Bloomberg.

Private Banking

Shares of ICBC rose 1.6 percent to HK$4.57, the highest in two months, in Hong Kong trading, at 1:02 p.m. The benchmark Hang Seng Index gained 2 percent.

The Hong Kong unit’s private banking center, which covers Asia and the Middle East, is expected to double the number of clients this year, Ying said, without disclosing the current level.

ICBC, the world’s most profitable lender, made its first overseas acquisition in 2000 when it paid $231.5 million for control of Union Bank of Hong Kong Ltd., the predecessor of ICBC (Asia). ICBC had 239 overseas institutions operating across 33 countries last year, rising 18 percent from a year earlier, according to its annual report.

“Despite their still-robust growth prospects at home, Chinese banks have been compelled to expand overseas,” Standard & Poor’s analysts Ryan Tsang and Qiang Liao wrote in a July 30 report. “China’s huge trade surplus and its position as a major destination for foreign direct investment have translated into excessive liquidity in the domestic market.”

To contact the reporter on this story: Stephanie Tong in Hong Kong at stong17@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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