December 5, 2012 / 9:56 AM / in 5 years

BASIS POINT-ICBC eyes emerging markets as it expands global presence

HONG KONG, Dec 5 (Basis Point) - Industrial & Commercial Bank of China is eyeing business opportunities in emerging markets as the world’s biggest bank by market value opens new branches in Latin America, Eastern Europe and the Middle East.

ICBC last Friday opened a subsidiary in Peru, its first wholly-owned unit in South America. And on November 12, it became the first Chinese bank to enter Argentina, getting approval from local authorities to take 80 percent of commercial lender Standard Bank Argentina and its two affiliates, asset manager Standard Investments and commercial service provider Inversora Diagnol.

In Europe in late November, ICBC opened branches in Warsaw and Barcelona and a European private banking centre in Paris. Earlier this year it acquired banking permissions for branches in Riyadh and Kuwait.

It is also seeking to penetrate into Africa via Johannesburg-based Standard Bank in which it owns a 20 percent stake. Standard Bank is Africa’s largest lender by assets.

“The rapid economic growth in emerging markets has brought a new window of opportunity for Chinese banks’ overseas business,” said Bin Wu, ICBC’s general manager, international banking department, in an email interview with Basis Point as he travelled from one branch opening ceremony to another.

Given its track record in the US loan market, where ICBC opened its branch in late 2008 and snapped up over US$1 billion of loan assets within a year, the Chinese bank is expected to have similar ambitions in these new markets.

This year, the bank has been actively involved in deals for emerging-market names.

Last month, ICBC joined as mandated lead arranger in PT Garuda Indonesia’s US$120 million two-year club loan with Bank of China and five other foreign banks.

In August, it led a US$200 million eight-year club with China Development Bank and HSBC for another Indonesian name, PT Krakatau Steel Tbk, to finance a blast furnace plant complex in the Southeast Asian country.

The bank also participated in a US$300 million three-year dual-tranche term loan for Mongolian Mining Corp in April, which was led by Standard Bank Asia.

“We have made new breakthroughs in key target markets by acquiring banking permissions or through mergers and acquisitions,” Beijing-based Wu said. “We will expand in emerging and developed markets simultaneously.”

To date, the bank has subsidiaries and branches in 37 countries and regions.

DEVELOPED-MARKETS PRESENCE

Aside from emerging markets, ICBC on November 29 opened its American operation, ICBC (USA), which was established by acquiring 80 percent of Bank of East Asia(USA) and thus obtaining local retail business permission, which ICBC’s existing wholesale licence did not provide.

Immediately after gaining that US wholesale licence in 2008, ICBC joined several syndicated loans for investment-grade names with large tickets of several hundred million, including for Pfizer, Wal-Mart, Southwest Airlines, Harvard University, Dell and UPS, according to Thomson Reuters LPC data.

Over the years, the bank, via its long-established offices in London, Singapore and Hong Kong, has led or participated in financings for big international names such as British Airways, Trafigura and Yum! Brands.

According to data provided by ICBC, its overseas units had total outstanding assets of US$154.46bn at the end of September, with a 0.45% NPL (non-performing loan) ratio.

SUPPORTING CHINESE NAMES

As China’s biggest state-owned commercial bank, ICBC puts great emphasis on supporting Chinese corporations’ outbound business, Wu said. “Chinese corporations have made rapid developments in stepping outside the border, which lays a solid foundation for banks’ client base.”

Wu said ICBC this year has provided financings for China Three Gorges Corp to buy a 21 percent stake in Portugal’s energy firm EDP, which cost the Chinese energy giant 2.7 billion euros (US$3.53bn), and for Sany Heavy Industry Co Ltd’s 360 million euro acquisition of German concrete pump maker Putzmeister.

The bank has also participated in CNOOC’s US$6 billion 12-month bridge financing for its US$15.1bn acquisition of Canada’s Nexen, according to Thomson Reuters data. The deal is pending regulatory approval from Canada and the US.

“ICBC will explore opportunities in resource-related structured finance, overseas merger and acquisition financing, overseas project finance and buyer’s export credits on a global scale,” Wu said.

ICBC has an “A” long-term issuer credit rating from Standard & Poor’s and an “A1” long-term foreign currency bank deposit rating from Moody‘s. For the nine months to September, the bank reported net profit of Rmb185.6 billion (US$29.8 billion). Its third-quarter profit was Rmb62.44 billion, up 15% year on year.

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