Banks: Citi Grows, ICBC Tries Dim Sum 花旗推积极扩张计划 工行首发点心债
Beijing’s new openness to global banks is leading a growing number of foreign lenders to test the China market, with US giant Citigroup (NYSE: C) becoming the latest to announce an aggressive expansion plan to tap the new open atmosphere. At the same time, China’s own banks are continuing their own global expansion by offering a wider array of yuan-denominated services to foreign investors, with leading bank ICBC (HKEx: 1398; Shanghai: 601398) making its first major offering of so-called dim sum bonds in Hong Kong. The 2 trends are both part of China’s efforts to build a world-class financial services industry as it tries to wean its banks from their history of policy-based lending to big state-owned enterprises and make them more commercially driven.
Let’s take a look at the Citigroup news first, as it looks like the latest sign that China is finally truly opening its domestic banking market to foreign competition after years of erecting bureaucratic obstacles to limit activity of international banks. Foreign media are citing Citi’s global head of retail banking saying the lender plans to double its number of outlets in China over the next 3 years to 100. (English article)
China formally agreed to open its financial sector to foreign banks when it joined the World Trade Organization (WTO) in 2001, but then proceeded to erect numerous obstacles that limited their ability to compete with local giants like ICBC. But following the global financial crisis, Beijing has increasingly realized the importance of foreign competition, especially as foreign banks are much more experienced than their state-controlled Chinese rivals in private-sector lending to small and medium-sized businesses that are becoming an increasingly important part of China’s economy.
That recognition has led Beijing to encourage more mid-sized foreign banks to enter China, with one such US lender, California-based Silicon Valley Bank, recently getting rapid approval to open a China joint venture with Shanghai-based partner Pudong Development Bank (Shanghai: 600000). (previous post) Look for more of these aggressive new moves by both big and smaller international banks into China in the next 2 years.
Meantime on the international stage, Chinese media are reporting that ICBC recently began marketing its first yuan-denominated bonds for global investors in Hong Kong, which will be 3-year notes with an interest rate of about 3.15 percent. ICBC previously offered such so-called dim sum bonds through its Hong Kong unit, but this is apparently the first such offering by the Beijing-based parent.
ICBC joins rival Bank of China (HKEx: 3988; Shanghai: 601988) in recently offering such bonds overseas. I’ve previously said that I like both ICBC and Bank of China for their aggressive but focused approaches to overseas expansion, and would say these 2 players could be interesting ones to watch on the world stage, perhaps someday providing some new competition for established global names like Citi.
Bottom line: Citigroup’s new aggressive expansion plan in China reflects a new openness by Beijing to foreign competition, with more such moves likely in the next 2 years.
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