By Gareth Vaughan
If, like me, you initially missed the summer holiday news that Chinese banking behemoth the Industrial and Commercial Bank of China Limited (ICBC) wants to register as a bank in New Zealand it shouldn't, however, come as a surprise.
Early in January both Fairfax and Radio NZ reported the Chinese government controlled ICBC has applied to the Reserve Bank for banking registration. The Reserve Bank doesn't comment on bank licence applications, merely releasing a brief statement when/if it grants a licence. ICBC appears to have reserved the names ICBC New Zealand Limited and ICBC Software Development Service Limited via the Companies office in preparation for setting up shop here.
The largest of China's big four state controlled commercial banks, ICBC was listed on both the Hong Kong and Shanghai stock exchanges in October 2006 in what was then the world's biggest initial public offering valued at US$21.9 billion. ICBC accounts for about 13% of loans in China and around 15% of all deposits.
Assuming its application gets rubber stamped by the Reserve Bank, what can we expect from ICBC? It was granted approval by the Australian Prudential Regulation Authority to set up in Australia as a foreign authorised deposit taking institution in 2008. It now has branches in Sydney, Melbourne and Perth, having opened the Melbourne one last November. The Melbourne office is said to be focused on developing business outside the resources sector, targeting Australian and Chinese corporates and private clients.
Sydney 'a significant breakthrough'
ICBC itself says of the establishment of its Sydney branch: "The successful establishment of the Sydney branch was regarded as a significant breakthrough in the bank’s progress towards internationalization, strengthening of it’s ability to improve it’s international management standards, and to provide a comprehensive range of banking services to the Australian and New Zealand markets which have been identified as one of the most prosperous regions in the Southern hemisphere."
"Sydney branch provides its clients with an extensive range of banking services, including trade finance, project finance, syndicated loans, corporate loans, deposits, foreign exchange, derivatives, remittances, settlement, clearing as well as other related services."
If ICBC's initial target is trade finance, it'll probably be treading most firmly on HSBC, Citigroup and ANZ's toes. There's a growing number of Chinese companies buying New Zealand assets - Haier taking full ownership of Fisher & Paykel Appliances and potentially selling F&P Finance, Cheung Kong Infrastructure Holdings buying EnviroWaste and Shanghai Pengxin buying the Crafar farms, for example. And with a Free Trade Agreement, China is the second biggest destination for New Zealand exports - NZ$6.6 billion worth in the year to November, and biggest source of imports with NZ$7.7 billion worth in the November year.
And if those controlling ICBC want to spread their tentacles more broadly into the New Zealand banking sector, it certainly has deep enough pockets to buy up any banking assets available. In a report strenuously denied by HSBC, the Financial Times said last May that the British-based bank would sell or shut its operations in several Asia-Pacific countries, including New Zealand. Such a New Zealand foothold as HSBC, if it was available, might appeal to ICBC.
Global expansion underway
Back in mid-2011 interest.co.nz covered a PwC report suggesting China would have the world's biggest domestic banking market by 2023 and that China's banks were likely to expand overseas. And in ICBC's case this is certainly well underway.
It gained a Brazilian banking licence in December and ICBC has also been touted by Reuters, along with ASB's parent Commonwealth Bank of Australia and Qatar National Bank, as a potential bidder for Rabobank's Indonesian unit. And Bloomberg reported last month that ICBC might buy a controlling stake in the London-based commodities and foreign exchange business of South Africa's Standard Bank Group as it expands overseas to service the growing number of Chinese companies operating around the world.
There's further detail on ICBC's overseas expansion - involving Axa Minmetals Assurance Co., Standard Bank Argentina, and the Bank of East Asia (USA) National Association, in its third quarter financial results release here.
With ICBC now seeking New Zealand registration, following on the heels of India's Bank of Baroda and Bank of India, the question is probably when, rather than if, one or more of the three other big state owned Chinese banks - the Bank of China, Agricultural Bank of China and China Construction Bank - also seek a New Zealand presence.
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