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.
Tag Archives: Bank of China
Crisis-Hit China Firms Gain Banking Ally 国开行贷款助中国概念股私有化
It seems that short sellers aren’t the only ones trying to make some quick money from the confidence crisis plaguing US-listed Chinese stocks, with word that state-owned lender China Development Bank (CDB) is also trying to capitalize on the situation by providing loans to help some companies privatize. If true, the reports would just mark the latest twist in a saga that started more than a year ago when short sellers began to expose a series of accounting scandals at US-listed Chinese firms, sparking a sell-off in their shares. CDB’s move may also auger the start of a bigger wave of privatizations that could see some big US- and Hong Kong-listed companies go private as well.
Banks Brace for Bad Loan Jump 银行中报坏账率料大幅上升
It’s one thing when analysts say China’s banking sector is facing a massive bad loan crises, but quite another when someone from the industry admits there is a problem, which is what has finally happened with new remarks from Bank of China’s (HKEx: 3988; Shanghai: 601988) chairman. Analysts have been warning of this problem for more than a year now, and a regulator even added his voice to the concerns last month (previous post), after China’s top banks went on a lending binge in 2009 and 2010 as part of Beijing’s 4 trillion yuan economic stimulus package.
Singapore Votes For ICBC 新加坡看好中国工商银行
After scooping up a steady stream of Chinese bank shares being dumped by other major institutional investors over the past year, the Singapore government appears to be placing its bets on China’s biggest lender, ICBC (HKEx: 1398; Shanghai: 601398), based on its latest move. Before I get into the details behind the lmove by Temasek, Singapore’s big sovereign wealth fund, I should say that I agree that ICBC looks like the most attractive of China’s big bank stocks, both due to its traditional position as a business lender in the domestic market and also for its smart foreign expansion strategy focusing on developing markets. Now let’s take a look at the actual news, which has Temasek confirming that it is selling $2.4 billion worth of shares of 2 other top Chinese lenders, Bank of China (HKEx: 3988; Shanghai: 601398) and China Construction Bank (HKEx: 939; Shanghai: 601939). (English article) That sale comes just weeks after Temasek purchased around $2.5 billion worth of ICBC shares from Goldman Sachs (NYSE: GS), which joined other major global banks including Bank of America (NYSE: BAC) and Royal Bank of Scotland (London: RBS) in selling off big stakes they purchased in China’s major lenders 5-6 years ago. (previous post) Throughout the sell-off, Temasek has been one of the few cash-rich investors that has continued to show an interest in the Chinese bank shares, which many investors have avoided over concerns they may be on the brink of a long downturn if and when many of the questionable loans they made under Beijing’s economic stimulus plan during the global financial crisis start to sour. Now Temasek is finally realizing it may not be too smart to invest so much money in this particular sector, and is trimming its holdings to focus on ICBC, which it sees as the strongest player in the group. As I said above, I personally agree with Temasek since ICBC is probably the best positioned to suffer the least in the coming downturn for China’s banking sector. As a lender to businesses, ICBC should have less exposure to the real estate sector, which is expected to drop sharply in the next 2 years as Beijing shows a steadfast determination to cool the country’s overheated property market. On the global front, ICBC has made a steady stream of targeted investments in emerging markets in Latin America, Africa and Southeast Asia, seeking to leverage its expertise in those kinds of markets to diversify from its strong dependence on China. Last year the bank’s profits from overseas operations rose 18 percent, trailing its 37 percent rise in overall profits that year. But as profit growth from domestic operations slows or even contracts in the months ahead, steadiness in the international business will help ICBC to outperform many of its peers.
Bottom line: Singapore’s focus on ICBC reflects the bank’s relatively strong position compared with its peers as the broader Chinese banking sector heads into a downturn.
Related postings 相关文章:
◙ Bank of China Results: Downturn Ahead 中行业绩黯淡 或预示银行业将迎来低迷期
◙ ICBC, Huawei: It’s Cold Out There 工商银行、华为：国外市场冷清
◙ Goldman Flees ICBC as Bank Crisis Looms 中国银行业危机隐现 高盛迅速转让工行股票
Bank of China Results: Downturn Ahead 中行业绩黯淡 或预示银行业将迎来低迷期
Bank of China (HKEx: 3988; Shanghai: 601398) made news earlier this week when it became China’s first member at the prestigious London Metals Exchange (English article), but its latest headlines are far less positive as it reported lackluster growth in the first quarter that was below market expectations. (earnings announcement; English article) The 10 percent profit growth for the quarter was less than half the 28 percent growth rate from a year earlier, when Bank of China and its peers were reaping big new profits after a lending binge ordered by Beijing to stimulate the domestic economy during the global economic crisis. With the economy now showing signs of slowing sharply as the government tries to cool the real estate market and tame inflation, many fear that Chinese banks could start to see many of the loans they made during that binge start to sour. Recent weakness in the stock market, following a rally early in the year, could add to the problems, as many recent bank loans have gone to fund stock buying. From a purely numerical perspective, Bank of China’s 10 percent profit rise doesn’t look too bad, since that kind of growth rate is certainly respectable. But more worrisome is growth rate’s slowing, which is likely to accelerate in the next 2 quarters and could even turn negative by the end of the year. Bank of China is one of the nation’s top 4 lenders, and first-quarter results will come out later today from the other 3, ICBC (HKEx: 1398; Shanghai: 601398), China Construction Bank (HKEx: 939; Shanghai: 601939) and Agricultural Bank of China (HKEx: 1288; Shanghai: 601288). I would expect all 3 of the other big lenders to report slowing profit growth as well, signalling a recent rally for their stocks could soon be finished. Most of China’s major bank stocks performed poorly for most of last year on concerns that they would soon face a flood of bad loans after the lending binge of 2009 and 2010. But most have bounced back since then as Beijing took steps to address the problem, including allowing many lenders to raise billions of dollars in new capital to strengthen their balance sheets. Bank of China’s own shares have risen nearly 50 percent since hitting a low early last October. Perhaps sensing that the rally may soon be over, Goldman Sachs (NYSE: GS) became the latest major shareholder in a Chinese bank to sell down its stake earlier this month, dumping more of its stock in ICBC. (previous post) Goldman joined Bank of America (NYSE: BAC) and Citigroup (NYSE: C), which last year also sold off large stakes in China Construction Bank and Pudong Development Bank (Shanghai: 600000), respectively, partly due to concerns about a looming Chinese banking crisis. Following this lackluster Bank of China earnings report, investors will be watching closely to see if the other 3 banks also report weak earnings, and also if any are showing signs of growing bad loans. If the reports are weak, which seems likely, look for a sell-off in Chinese banking shares next week, which could mark the beginning of a long downturn for the sector.
Bottom line: Bank of China’s lackluster first-quarter report could mark the beginning of a long downturn for Chinese lenders and their stocks.
Related postings 相关文章:
◙ Goldman Flees ICBC as Bank Crisis Looms 中国银行业危机隐现 高盛迅速转让工行股票
◙ UnionPay Stirs IPO Pot With Big Numbers 银联有望上市
◙ AgBank Results: First Look at Banking Winter 中国农业银行财报：银行业的冬天
News Digest: April 27, 2012 报摘： 2012年4月27日
The following press releases and media reports about Chinese companies were carried on April 27. To view a full article or story, click on the link next to the headline.
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◙ iPad Talks: Proview Lawyer Says Apple (Nasdaq: AAPL) Becoming More Positive (Chinese article)
◙ Bank of China (HKEx: 3988) Announces Q1 Results (HKEx announcement)
◙ Sinopec (HKEx: 386) Announces Q1 Results (HKEx announcement)
◙ Perry Ellis (Nasdaq: PERY) Forms Greater China JV With Manhattan Brand (Businesswire)
◙ Spreadtrum (Nasdaq: SPRD) Says TD-SCDMA/EDGE Android Platforms Now Available (PRNewswire)
◙ Latest calendar for Q1 earnings reports (Earnings calendar)
MoneyGram In Latest Financial Services Move 速汇金携手中行 提供汇款服务
After years of watching the major global banks first pile into China only to more recently retreat, it’s refreshing to see a new wave of lower-key investments and tie-ups coming into the country again from second-tier players with more realistic expectations for the market. The latest in this string of lower-profile deals has MoneyGram (NYSE: MGI) signing a deal to provide its specialty money-transferring services through Bank of China’s (HKEx: 3988; Shanghai: 601988) more than 10,000 branches nationwide. (company announcement) The deal sharply expands a previous tie-up that had the pair offering MoneyGram’s services at a much smaller 240 Bank of China branches in Beijing, and is clearly targeted at the growing number of Chinese living overseas, who now send an estimated $57 billion home each year. The deal follows another similar expansion of a tie-up between MoneyGram and ICBC (HKEx: 1398; Shanghai: 601398), another of China’s top 4 banks, aimed at money transfers between Japan and China. Other interesting lower-key deals in recent months have included an investment in a domestic electronic payments company called Lianlian by American Express (NYSE: AXP) (previous post), and several major tie-ups between foreign banks with UnionPay, China’s operator of a financial settlements network similar to the Cirrus and Plus networks operated by MasterCard (NYSE: MA) and Visa (NYSE: V). PayPal, the electronic payments arm of online auctions specialist eBay (Nasdaq: EBAY) has also indicated it wants to delve further into China’s domestic e-payments market, stating very clearly on several recent occasions that it has applied for a new round of licenses soon to be offered for such services. (previous post). While names like MoneyGram, PayPal and even American Express aren’t as high-profile as the more familiar global banking giants, their quieter and relatively cautious advance is a refreshing and strong contrast to big names like Citigroup (NYSE: C), Bank of America (NYSE: BAC) and Goldman Sachs (NYSE: GS), which have all recently retreated from a market that all previously hyped as full of potential with its billion-plus consumers. Citi recently sold its long-held stake in a regional Shanghai bank, while Bank of America and Goldman have sold off most or all of their stakes in China Construction Bank (HKEx: 939; Shanghai: 601939) and ICBC, respectively. (previous post) Citi, Bank of America and Goldman were all quite bullish on China’s potential when they made their investments around 5-6 years ago; but since then they’ve discovered the tie-ups didn’t really help them to build up their China presence, and most finally sold their stakes to raise cash to bolster their balance sheets after the global financial crisis. I personally think these smaller, more targeted investments from the likes of MoneyGram, American Express and PayPal are much more realistic than the bigger headline-grabbing purchases of the big global banks, and would fully expect to see an acceleration in similar moves from other smaller global players in the next 2 years.
Bottom line: MoneyGram’s latest tie-up with Bank of China looks like a smart, targeted play at China’s financial services market, with more smaller, low-key deals likely in the next 2 years.
Related postings 相关文章:
◙ AmEx Chases E-Payments With Lianlian Link 美国运通联手中国连连集团
◙ Goldman Flees ICBC as Bank Crisis Looms 中国银行业危机隐现 高盛迅速转让工行股票
◙ New UnionPay Tie-Up Boosts US Presence in IPO Run-up 中国银联携手US Bancorp 未来有望两地上市
AgBank Results: First Look at Banking Winter 中国农业银行财报：银行业的冬天
We’re getting a first look at what could be a long-predicted chill set to take hold in China’s bloated banking sector, with Agricultural Bank of China’s (HKEx: 1288; Shanghai: 601288) annual results showing its quarterly profit fell for the first time since it went public on slower lending and a massive provision against future bad loans. Now the big question that remains is: How long will the winter last, and how cold will it get? AgBank gave the markets a preview of what’s ahead as it became the first of China’s big four lenders to announce its annual results (earnings calendar), which revealed a 14 percent drop in its fourth-quarter profit. (English article) China Construction Bank (HKEx: 939; Shanghai: 601939), the nation’s second largest lender, is set to report later today, while ICBC (HKEx: 1398; Shanghai: 601398) and Bank of China (HKEx: 3988; Shanghai: 601988) will report next week. AgBank is considered the weakest of China’s top 4 lenders, so it’s important not to take its results as too reflective of the broader industry. Still, the numbers look less than exciting, providing a hint of things to come. (results announcement) Perhaps the most telling figure — and also a bit alarming — is the 22.8 billion yuan in provisions the bank took in 2011 against future bad loans, more than double the amount from the previous year. The increase should come as a surprise to no one, as many are predicting a jump in non-performing loans after China’s banks embarked on a lending binge in 2009 and 2010 as part of Beijing’s economic stimulus program at the height of the global financial crisis. Many of the loans made during that period were of questionable quality, especially ones for infrastructure projects to local governments that may now be in danger of defaulting. Beijing has taken a number of moves to ease the situation, including allowing banks to restructure some of those loans to delay repayment (previous post) and also letting banks raise billions of dollars in fresh new capital just 2 years after a previous money-raising wave that saw them collectively tap financial markets for more than $100 billion. Bank of Communications (HKEx: 3328; Shanghai: 601328) became the latest lender to raise fresh capital earlier this month, collecting $8.9 billion through a private placement to mostly government entities. (previous post) AgBank itself said it has no plans to raise fresh capital, thanks in part to 50 billion yuan, or nearly $8 billion, in debt that it issued last year. Issuers of such debt seldom say who the buyers are, but I suspect the Chinese government and government-backed institutional investors were also some of the major purchasers, as Beijing has shown an increasing willingness to rescue the banks since much of their troubles are the direct result of its lending directive during the financial crisis. China bank stocks have rallied at the start of the year following a dismal 2011, but look for that rally to quickly lose momentum in the months ahead when more similar financial results start to come out.
Bottom line: AgBank’s results, including a rare drop in quarterly profit, are setting the stage for a long-awaited banking downturn, which will kill a nascent rally in China banking stocks.
Related postings 相关文章:
◙ Bocom Recapitalizes, Govt Pays the Bill 交行再融资或掀起新一轮银行再融资热潮
◙ More Banking Bad News From Minsheng 民生银行融资揭示银行业困境
◙ Beijing’s Latest Mixed Signal Bodes Poorly for Banks 中央政府最新政策预示对银行不利
News Digest: March 22, 2012 报摘： 2012年3月22日
The following press releases and media reports about Chinese companies were carried on March 22. To view a full article or story, click on the link next to the headline.
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◙ China Mobile (HKEx: 941) Chairman Wang Jianzhou to Retire Tomorrow (Chinese article)
◙ Blizzard (Nasdaq: ATVI), NetEase (Nasdaq: NTES) Renew World of Warcraft License in China (Businesswire)
◙ SMG’s BesTV, Bank of China (HKEx: 3988) Launch TV Banking Service (English article)
◙ Lenovo (HKEx: 992) to Shift Business PC Production to Japan – Report (English article)
◙ Jaguar Land Rover seals JV with China’s Chery (English article)
◙ Latest calendar for Q4 earnings reports (Earnings calendar)
China I-Banks Zero In on Piper Jaffray 中国投行聚焦美国派杰
I’ll start off this Friday with a couple of interesting items on Sino-foreign tie-ups involving financial firms, one involving Piper Jaffray (NYSE: PJC), a boutique US investment bank with a history in China, and the other involving another US firm in a new partnership with UnionPay, China’s dominant electronic transaction specialist. Let’s look at Piper Jaffray first, as that’s the most intriguing of the 2 developments, with shares of the company jumping as much as 10 percent after US media reported it had been approached about a buyout from an unnamed Chinese company. (English article) Piper Jaffray responded with a statement saying it intends to remain independent for now, cooling down its shares which ultimately ended up a more modest 2.6 percent in Thursday New York trade. (company statement) As a US-based niche player with a relatively modest market cap of $500 million and a decade of experience helping Chinese tech companies go public in the US, Piper Jaffray does indeed seem like the perfect acquisition target for a Chinese financial company looking to expand its reach abroad. Potential Chinese buyers would include Bank of China (HKEx: 3988; Shanghai: 601398) and ICBC (HKEx: 1398; Shanghai: 601398, as well as CICC, the nation’s largest investment bank, all of which have signaled they would like to expand their investment banking activity abroad. Piper Jaffray’s lack of denial means it has probably been approached by one or more of these players, and I expect this story isn’t finished yet, with potential for a bidding war to break out. Meantime, another US company named WorldPay has signed a deal that will allow Chinese buyers to purchase goods in the US and most of Europe over the electronic payments network operated by UnionPay, China’s dominant player in electronic financial transactions. (company announcement) This deal looks interesting as much for UnionPay as it does for WorldPay, as it opens up huge new possibilities for Chinese merchants to purchase goods from sellers in the US and most of Europe — something that is now difficult for most Chinese firms due to China’s strong currency controls. UnionPay has been aggressively expanding abroad through a number of tie-ups with major banks in recent years, but this is one of the biggest e-payments deals to date, and I suspect it will be followed by more in the year ahead. This rapid build-up is undoubtedly being encourage by Beijing, and I predict we will see an IPO, most likely in Hong Kong and Shanghai, for UnionPay either this year or next, providing an interesting alternative for investors who want to buy into China’s financial services sector with the risk of owning shares of a big state-run bank.
Bottom line: A bidding war between Chinese buyers could soon erupt for investment bank Piper Jaffray, while UnionPay’s new US tie up is the latest step in an accelerating global expansion.
Related postings 相关文章:
◙ Bank of China Considers Offshore I-Banking 中国银行考虑收购RBS投行资产
◙ Bocom Chases Global I-Bank Business With Big Bucks 交通银行打算花大价钱吸引投行人才
◙ New UnionPay Tie-Up Boosts US Presence in IPO Run-up 中国银联携手US Bancorp 未来有望两地上市
Bank of China Sees Gold in Global Commodities Trade 中行赴全球商品市场淘金
I often write about China’s banks collectively as a group, as there’s little to differentiate them from one another in their home market where they act mostly the same, taking all their orders from Beijing. But it’s a different story on the global stage, where Bank of China (HKEx: 3988; Shanghai: 601988) is making some recent interesting moves to position itself as a key intermediary in China’s growing participation in global commodities markets as its resource firms expand their activities abroad. In the latest move on that front, Bank of China has formed a tie-up with US-based CME, the world’s largest operator of futures markets, according to a domestic media report. (English article) The tie-up will allow Bank of China to act as an agent for buying and selling of futures contracts on all of the CME’s markets, allowing it to serve a growing number of Chinese resource firms that are likely to tap into those markets as Beijing gradually allows them to expand their activities abroad. Most of China’s resource companies are now limited to trading on China’s domestic futures markets, which are largely closed to foreigners and don’t always fully reflect global trends. Bank of China signed a similar contract with the London Metals Exchange (LME) last month, giving it similar rights to trade on Europe’s biggest metals exchange, showing it intends to be a serious player in this potentially lucrative market. (English article) Perhaps most intriguing in this pair of new deals are comments by a Bank of China official in the latest CME agreement saying the bank wants to eventually offer yuan-denominated settlement services on the CME’s exchanges, which could be attractive not only to Chinese companies but also to the growing number of foreign firms who do big business with China. As a Chinese bank, Bank of China would have a natural advantage in offering yuan-denominated services over foreign rivals, giving it a lucrative niche market with lots of potential. This push looks similar to what ICBC (HKEx: 1398; Shanghai: 601398), another of China’s big 4 banks, is trying to do with its own big push to offer yuan services overseas, including providing yuan for a small group of nations that want to add the currency to their foreign exchange reserves. (previous post) These kinds of moves, while probably encouraged by Beijing as part of its broader push to internationalize the yuan, are one of the few things that differentiate the big banks from one another for stock buyers trying to decide which bank they like best. That said, revenue from international markets is still just a tiny part of the total business for all of China’s banks, though it certainly provides an interesting indicator of where each sees its future growth prospects.
Bottom line: Bank of China’s aggressive move into global commodities trade will position it as a major intermediary as China’s resources companies become more active abroad.
Related postings 相关文章:
◙ Bank of China Considers Offshore I-Banking 中国银行考虑收购RBS投行资产
◙ Beijing’s Financial Shufflle: Bankers or Regulators? 中国金融高层“大换血”
◙ ICBC Discovers China’s Latest Low-Cost Export: Currency 工行将从非洲人民币结算业务中获益
