Construction Bank, Bank of America start leasing JV

HONG KONG/BEIJING (Reuters) - China Construction Bank (601939.SS) (0939.HK) and Bank of America (BAC.N) have set up a $615 million financial leasing venture, the first major Sino-foreign venture to start up formally in the nascent sector.

Bank of America, which two years ago paid $3 billion for a stake in China's top property lender and is now an 8.19-percent shareholder, owns 24.9 percent of the venture and its partner the remainder, as agreed earlier, they said in a statement on Friday.

The Beijing-based JV, with the 4.5 billion yuan ($615.7 million) registration capital ranking it the top among peers, is the first such firm in which a foreign commercial bank holds a stake.

This represents a step forward for China's opening of its financial market, Guo Shuqing, chairman of CCB, told a press conference in Beijing.

"Our bank will not rely on loan expansion for profits. We will launch diversified products and services to cater our clients," Guo said.

Construction Bank, like rivals Industrial and Commercial Bank of China (1398.HK) (601398.SS) and Bank of Communications (3328.HK) (601328.SS), won regulatory approval last quarter to set up the country's first leasing ventures.

The country's lenders are now making forays into financial leasing as part of efforts to expand beyond plain-vanilla banking services, a campaign that has seen the biggest industry players diversifying into insurance, securities, trusts, and asset management.

Bank of America's venture will focus on leasing equipment and facilities to China's power generation and transmission and rail industries, and eventually also extend and obtain loans, sell leased items, and offer consulting, among other services.

Business transactions in China's burgeoning equipment leasing arena totaled $4.25 billion in 2005, less than 1 percent that of the United States's and 2 percent Japan's, versus a global $600 billion, state media have reported.

Turing to the 2008 loan limit the central bank recently imposed on CCB, Guo said that it was unlikely to affect the lender's profits next year.

The People's Bank of China has capped 2008 quotas for new lending by the Big Four state banks as part of its campaign to curb credit growth and keep the economy on an even keel.

China Construction Bank was told to keep new loans in 2008 within this year's target, which was 350 billion yuan ($47.83 billion), banking sources told Reuters this week.

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(Reporting by Edwin Chan in Hong Kong and Xie Heng, Eadie Chen in Beijing)