The Wall Street Journal-20080129-ICBC to Focus on Emerging Markets
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ICBC to Focus on Emerging Markets
Full Text (419 words)Industrial & Commercial Bank of China Ltd. plans to focus on strategic acquisitions in emerging markets rather than investing in global banks, ICBC's chairman said.
"Our overseas acquisitions must be in line with our overall development strategy," Jiang Jianqing told reporters, on the sidelines of a closing ceremony for ICBC's acquisition of an 80% stake in Seng Heng Bank Ltd. of Macau. "We're not so concerned about whether a bank is just cheap."
Mr. Jiang's comments indicate that the state-owned lender, China's biggest bank by assets and market capitalization, is unlikely to participate in shoring up the balance sheets of the banking giants that have been pursuing big capital injections from government investment funds such as those in China, Singapore and Abu Dhabi, United Arab Emirates.
China Investment Corp., a major shareholder of ICBC, injected $5 billion into Morgan Stanley in December, helping to recapitalize the Wall Street firm after its big write-downs on mortgage-backed securities. Another Chinese state lender, China Development Bank, purchased a stake in Barclays PLC last year and planned to invest around $2 billion in Citigroup Inc. before senior Chinese leaders vetoed the plan.
Instead, Mr. Jiang said, ICBC will try to set up outposts in the world's major financial centers and focus on buying banks in emerging markets. Last year, ICBC applied to convert its New York representative office into a branch. Mr. Jiang said New York authorities have supported the branch application, but the bank still needs approval from the Federal Reserve.
Chinese banks, flush with cash from massive initial public offerings, are scouring the world for opportunities to deploy those funds to build their global presence. ICBC aims to expand its overseas assets and revenue to 10% of its overall business from around 3% now. In October, the bank made China's biggest-ever overseas acquisition when it agreed to pay about $5.5 billion to buy 20% of South Africa's Standard Bank Group Ltd., becoming the African lender's biggest shareholder.
Another reason Chinese banks are seeking to expand globally are regulatory limits on their loan expansion at home. Mr. Jiang said ICBC is aiming to expand its loans by about 10% this year.
He said ICBC will adjust its provisioning for any losses on holdings of U.S. subprime-mortgage-backed securities in line with the advice of its accountants. Its exposure to U.S. subprime-related securities is about $1.2 billion, Mr. Jiang said, a relatively small sum compared with its overall size. That amount is far smaller than that of rival Chinese lender Bank of China Ltd.
