Leading mainland lenders are intensifying their efforts to explore
acquisition opportunities in Hong Kong's highly competitive banking sector, in
search of a quick way to plug into Asia's financial hub and pave the way for
further overseas expansion.
China Construction Bank (CCB) has established
a special task force led by Vice-President Fan Yifei to study acquisition
opportunities in overseas markets, sources told China Daily.
CCB, the
mainland's third-largest lender, reportedly has an interest in Bank of America's
Hong Kong business and Wing Lung Bank, a medium-sized local
lender.
Meanwhile, the Industrial and Commercial Bank of China (Asia) has
its eye on at least another acquisition in Hong Kong in the next couple of
years, said Zhu Qi, the lender's chief executive officer.
The Hong
Kong-listed arm of the ICBC, the mainland's top lender, grew as a result of its
takeover of Fortis Bank Asia HK's retail and commercial banking operations in
2004 and Shenzhen-based Chinese Mercantile Bank in 2005.
China Minsheng
Banking Corp, the mainland's first privately run lender, said in March it was
also keen on entering Hong Kong, but it would do so by buying a local player
rather than opening branches.
And Minsheng's desire to acquire was
clearly illustrated by its bid in February for Asia Commercial Bank, the only
lender to be put on the market in Hong Kong in the past couple of
years.
CCB joined Minsheng and 10 other bidders in the battle to take
over Asia Commercial Bank.
Mainland lenders' enthusiasm to expand in Hong
Kong indicates their growing desire to explore international markets, against
the backdrop of Chinese firms' growing global role.
Mainland companies'
overseas investment totalled US$9.18 billion in 2005, up 140 per cent
year-on-year, making it all the more important for mainland banks to set up shop
in global trade and investment hubs.
And Hong Kong has a long-standing
reputation as a springboard for mainland businesses to use to enter the global
stage.
"Hong Kong is a window and the only overseas market mainland banks are
familiar with," said Andes Cheng, an analyst with China South Research Ltd.
"They have to learn how to walk here before they can run in the global
market."
Hong Kong is also an important testing ground in which they can
gain valuable experience of overseas business practices before they head into
foreign markets.
But acquisitions appear to be the only effective way to
expand in Hong Kong, a market dominated by HSBC, Hang Seng Bank and Standard
Chartered Bank.
More then 150 players from over 30 countries and regions
hold banking licences in the special administrative region, while thousands of
bank branches operate across the city. "There is just little space for any
newcomers," said Cheng. "It's more and more difficult to seek organic expansion
in Hong Kong."
Mainland lenders, especially latecomers such as CCB,
Minsheng bank and China Merchants Bank, will have to swallow existing players in
order to gain a foothold in the Hong Kong market.
And their chance to buy
others seems bigger as tightening margins have forced some local and foreign
banks to consider quitting the city.
Wing Lung Bank, a medium-sized local
lender, said it was "open" to any acquisition offers when it posted a 65.9 per
cent jump in first-half net profit last Wednesday.
Founded in 1933 by the
Wu family, which still owns a majority stake in the bank, Wing Lung is said to
be a target of CCB, although both sides deny that any talks are taking
place.
"Trading in Hong Kong will become harder and harder," said Casor
Pang, a strategist at Sun Hung Kai Financial.
Then it's all about how
attractive mainland banks' offers look, analysts said, pointing out the price to
buy a local lender could be very expensive if the Asia Commercial Bank deal is a
barometer.
Public Bank, Malaysia's third-largest lender, bought the Hong
Kong banking arm of Asia Financial Holdings Ltd for HK$4.5 billion (US$577
million) in February, representing 2.5 times its book value.
