China's major lenders broaden horizons

Compared with foreign counterparts, Chinese banks still have much to do to improve the performances of their foreign institutions, according to Thomas Chan, head of financial services for northern China at KPMG Huazhen, whose figures suggested that by the end of 2011, on average, foreign assets of major State-owned lenders accounted for 8 percent of their total assets.

Compare that with HSBC, for instance, which has 58.5 percent of its assets and 68.6 percent of its income coming from areas outside Europe, and Citibank, which has 52.3 percent of its income contributed by business outside North America, the figures showed what a challenge lies ahead for Chinese lenders.

Chan said the contribution of foreign business to total income of the major Chinese State-owned banks is an average 5.29 percent.

He added that the wider use of the yuan globally is already providing momentum for Chinese banks and Beijing's loosening of capital accounts to facilitate Chinese enterprises and individuals investing overseas is also creating larger demand for services provided by Chinese lenders.

Lin Zhihong, head of Minsheng's Hong Kong branch, said Chinese banks have played "an increasingly important role" in a series of overseas acquisitions conducted by Chinese companies around the world.

"Domestic enterprises and banks have large cooperation potential in terms of financial advisory services, project financing, settlement business and so on," he added.

ICBC, the world's biggest lender by market capitalization, has spent more than $6 billion on foreign acquisitions in the past three years, aiming to achieve a target of earning 10 percent of its assets and profits from foreign operations by 2016 against the current levels of 5.1 percent in terms of foreign assets and 3.2 percent in profits.

The lender's foreign assets increased by 64.7 percent year-on-year in 2011, while foreign pre-tax profit rose by 15.9 percent.

ICBC got approval from the US Federal Reserve last month to buy up to 80 percent of the Bank of East Asia Ltd's US unit for $140 million, the first time that a Chinese bank has been allowed to buy a majority stake in a local US depository institution, and it is waiting for approval to buy an 80 percent stake in the Argentine division of South Africa's Standard Bank Group Ltd for $600 million.

BOC, another major lender among the Big Four State-owned Chinese commercial banks, has also vowed to expand its foreign network, saying that it expects to become a truly world-class bank by 2020.

BOC used to be highly dependent on overseas services before it began exploring the domestic market at a rapid pace during the past decade.

Li Lihui, president of BOC, said that a 20 percent contribution of foreign business would be a well-balanced ratio.

In 2011, BOC set up 12 institutions abroad, while its foreign business made a profit of $4.6 billion, up 40.34 percent year-on-year.

Foreign earnings took up 17.3 percent of the group's total profit, 1.93 percentage points higher than a year earlier.

CCB, China's second-largest lender, aims to increase its contribution of profit from foreign branches from the current level of more than 2 percent to an ideal level of 5 percent by 2016.

The country's two other major lenders are still at the beginning phase of their globalization.