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SDB seeks to raise branch numbers after capital boost

By Wang Bo (China Daily)
Updated: 2009-08-28 08:13

Shenzhen Development Bank (SDB), the nation's first and only foreign investor-controlled lender, is seeking more branches across China after receiving a capital injection from the country's second largest insurer, Ping An, said Frank Newman, chairman and CEO of the bank, in an exclusive interview with China Daily.

"Opening new branches is our number one priority, because we found the bank's business could be well received in some cities where we haven't had presence so far," Newman said.

"The substantial capital addition from Ping An will move the bank up to a very strong capital position and put it in good shape to support future growth."

SDB spearheaded the public offerings of Chinese lenders in 1988. It has been in the limelight in the past few months because of an earlier announcement of a tie-up with Ping An Insurance Group, from which the bank expects to receive up to 10.7 billion yuan ($1.57 billion) through issuing new shares to Ping An in a private placement and boost its capital adequacy ratio to above 10 percent from 8.62 percent at the end of June.

In the face of concerns over whether the deal with Ping An would finally get regulator's approval, Newman said he saw no major blocks for the deal at the present stage. The bank's previous potential deals with GE and major domestic steel maker Baosteel failed mainly because of the regulators' opposition.

Ping An Insurance Group, which now owns another banking subsidiary itself, has to fix the integration of Ping An bank and SDB in the next three years because regulators do not allow two banks to run parallel with each other within one financial institution.

"One possible solution could be SDB and Ping An Bank merged some time later within the three years," the chairman said, adding there were other options to proceed with the integration that might also be subject to regulators' instructions.

The Shenzhen-based mid-sized lender has seen its plan to increase its footprint nationwide hindered by capital constraint problems, as a result of which the bank hasn't opened any new branches in the past six years.

With capital injection from Ping An, SDB is set to step up its national expansion. In mid July, the bank announced it would open a new branch in Wuhan, Hubei province, this year, which could gain the bank a foothold in central China, a lucrative market it has long been interested in.

Related readings:  SDB shareholders approve private placement to Ping An  Ping An Insurance has 'no need to raise funds for SDB stake'  Ping An makes no changes in buying into SDB  SDB reduces bad loans

With an operation in 19 cities across the nation at present, the bank has set a rather solid footing in eastern and southern China, while western and central parts of the nation remained largely untapped.

Newman, the 67-year-old former deputy secretary of the US Treasury who came in as chairman of SDB four years ago, is credited together with his team for turning around the once debt-ridden lender, which has reported an 8 percent net profit growth in the first half and had maintained its non-performing loan ratio at a low level of 0.72 percent by the end of June.

In his vision, SDB, which has a tradition of doing business with small and medium-sized enterprises (SMEs), aims for the middle market as its primary source of customers.

"It is getting harder for banks to specialize in giant companies because there is a trend globally for these companies to bypass the banking system and issue their own commercial papers and corporate bonds," he said.

"Banks that are focusing on SMEs will be in a much better position because they will depend on the banking industry basically forever."