Belgium's KBC to incorporate in China, add branches

By George Chen

SHANGHAI (Reuters) - Belgian financial services provider KBC Groep NV (KBC.BR) has decided to establish a locally incorporated banking unit in China, aiming to tap strong demand for wealth management services in the world's fastest-growing major economy, according to an internal memo.

KBC plans to increase the number of its branches significantly in China, where it now has only three -- in the major cities of Shanghai, Shenzhen and Nanjing, according to the memo, obtained by Reuters on Thursday.

The memo did not have financial details of KBC's proposed investments in China but a source familiar with the situation said the registered capital of KBC's China incorporation would be similar to that of other foreign banks which have already set up their locally incorporated units.

For instance, HSBC Holdings Plc's (HSBA.L) (0005.HK) China incorporation has a registered capital of 8 billion yuan ($1.14 billion), the same as Hong Kong's Bank of East Asia (0023.HK), versus 4 billion yuan for Citigroup Inc (C.N).

"It seems KBC has settled out a very aggressive plan in China to secure more wealthy Chinese clients after the launch of its fund management joint venture," said the source who declined to be identified as he was not authorised to speak to the media.

"Everybody is coming to China, no matter big or small, so (KBC) will not be a surprise," he added.

In 2007, KBC launched its fund management joint venture in Shanghai, KBC-Goldstate Fund Management Co, in which KBC, a major Belgian asset manager, holds a 49 percent stake.

So far the fund venture only manages one capital guaranteed fund, worth roughly 4 billion yuan.

A KBC representative could not immediately be reached for comment.

RETAIL BANKING

At present, KBC offers corporate and commercial banking services through its three local branches in China with client focus on Belgian companies and Chinese firms that have ambition to expand business in European markets.

After incorporating locally, KBC plans to offer retail banking services to Chinese individuals, according to the memo.

These would include regular deposit and loan services as well as fee income-based wealth management services, which are increasingly popular among the rapidly growing Chinese middle class.

Chinese banking regulators began to approval local incorporations of foreign banks including HSBC and Citigroup early last year.

Local incorporation is a requirement before Beijing will allow foreign banks fuller access to China's retail banking market -- with roughly $2 trillion in household deposits.

Foreign banks in China are subject to a range of restrictions. As non-locally incorporated foreign lenders, they are only allowed to take deposits of more than 1 million yuan from a Chinese retail customer.

Besides KBC's banking and fund business presences in China, a U.K. subsidiary of KBC has an investment quota of $100 million under China's Qualified Foreign Institutional Investor scheme, allowing foreign firms to invest in Chinese capital markets.

($1=7.000 Yuan)

(Editing by Keiron Henderson)