HONG KONG: Industrial and Commercial Bank of China (ICBC), the world's largest bank by market value, expects emerging markets in Asia to continue to be its first choice for international merger and acquisition (M&A) deals, a senior executive said yesterday.

"ICBC has an advantage in terms of culture in Asia and ICBC's capital is sound," Yi Huiman, senior executive vice-president of ICBC, told Sibos, a financial services conference, in Hong Kong.

"In addition, ICBC's past M&As proved to be successful," Yi added.

ICBC's Asia focus, including Thailand, is not to the exclusion of other global acquisitions. For example, while ICBC is seen as a potential buyer of the Thailand central bank's 47.58 percent stake in Siam City Bank, it announced in June that it would purchase 70 percent of Bank of East Asia's Canadian unit, as it expanded overseas.

The bank also holds a 20 percent stake in Standard Bank Group, Africa's top bank by assets.

As for Hong Kong, according to the market sources, ICBC is also the mainland lender showing the most interest in acquiring Wing Hang. However, neither bank has hired advisers for a possible deal.

Beijing-based ICBC last year lost out to China Merchants Bank (CMB) in a takeover battle for another family-controlled Hong Kong lender, Wing Lung Bank.

Shenzhen-based CMB eventually paid 3.1 times book value, making it the most expensive bank acquisition in Hong Kong in seven years by that measure. CMB said in April that it had written down the value of the investment by 579 million yuan.

These acquisition moves are set against an improving background of loan finances. ICBC's non-performing loan (NPL) balance and ratio are declining substantially because risk is expected to be well under control from now on, the bank's senior executive Yi said.

ICBC reported in late August that its non-performing loan ratio fell to 1.81 percent at the end of June from 2.29 percent a year earlier, partly due to an enlarged loan portfolio, expanded to sustain investment and spending.

In late July, the Chinese-language financial magazine Caijing reported that ICBC had already lent 83 percent of its full-year new lending target of 1 trillion yuan.

ICBC's loans and advances totaled 5.44 trillion yuan for the first half of the year, up 19 percent from the end of 2008, the bank said in its interim results last month.

Shares in ICBC dropped 0.67 percent, or HK$0.04, to close at HK$5.89.

China Daily - Reuters

(HK Edition 09/16/2009 page3)