CCB Explores Overseas Step to Indonesia
The conservative China Construction Bank (HKEx: 939; Shanghai: 601939), the nation’s second largest lender, may be preparing to take its first big steps onto the global stage, with an Indonesian deal that looks interesting though a bit risky. Media are reporting that the bank is in talks to buy a stake in closely held PT Bank Maspion Indonesia, whose owners want to sell more than 50 percent. (English article) The news comes not long after reports that CCB’s bigger rival, ICBC (HKEx: 1398; Shanghai: 601398), was in talks to buy a controlling stake in the Argentine unit of South Africa’s Standard Bank for $700-$800 million, as China’s largest lenders, with encouragement from Beijing, seek to spread their wings beyond their protected home market. (previous post) At first glance the potential CCB deal looks interesting. Indonesia is a developing market with many similar characteristics to China, which would allow CCB to leverage its experience to do business there. What’s more, PT Bank looks very manageable in terms of its size, with a modest value of around $200 million. My major concern comes in terms of regulation. According to the media reports, Indonesia is currently considering legislation that would limit foreign shareholders to holding minority stakes in banks. If PT Bank Maspion were a large lender with an experienced management team, this restriction might be less worrisome. But considering its smaller size, the lack of majority control could severely limit CCB’s ability to manage this new asset if it ended up buying a stake, restricting it to the role of a largely passive investor as its Indonesian management ran the show. That said, perhaps CCB would be better off as a more passive investor for its first major purchase abroad, allowing it to become more familiar with doing business outside China while leaving day-to-day business to locals who know the market better. On the whole, I would weigh in as neutral on this deal, which looks like a relatively risky but manageable first step onto the global stage for CCB.
Bottom line: CCB’s potential purchase of a minority stake in a mid-sized Indonesia lender looks like a risky but manageable first step for the bank onto the global stage.
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