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
The smoldering crisis quietly seeping through China’s financial services sector has infected the nation’s largest insurer, China Life (HKEx: 2628; Shanghai: 601628), which has announced plans to raise about $6 billion this year through the issue of subordinated debt, becoming the latest player to turn to financial markets to raise billions of dollars in new cash as provisions for shaky investments. (
The latest round of capital raising by major Chinese banks continues with the news that Bank of Communications (HKEx: 3328; Shanghai: 601328), the nation’s fifth biggest lender, has just recapitalized to the tune of $8.9 billion. But in a telling sign that investors have tired of this latest round of fund raising, the government has stepped in to pay most of the bill this time, setting a pattern for a growing number of bank recapitalizations likely to happen in the months ahead. In many ways, it’s only appropriate that Beijing help these banks bolster their finances, as the current weakness in their balance sheets is the direct result of their compliance with a government’s directive that saw them make record loans under a national economic stimulus package at the height of the global downturn in 2009 and 2010. In this latest development, BoCom has just raised a hefty $8.9 billion through a private placement with a group of buyers mostly linked to major state-owned entities, including the finance ministry, the national pension fund, and China’s state-owned tobacco monopoly. (
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. (
The latest sign of trouble is emerging from China’s banking sector, where Minsheng Bank (HKEx: 1988; Shanghai: 600016), one of the nation’s more commercially-focused lenders, has just announced plans to raise up to $1.6 billion or more to bolster its shaky capital base, even as Beijing is encouraging banks to lend even more. Minsheng’s plan would see it issue new H-shares in Hong Kong, and could also see a convertible bond offering linked to its Shanghai-listed A-shares, according to a filing with the Hong Kong stock exchange. (
It’s not often that I get to write about new initiatives by big foreign banks in China these days, so I’m taking this opportunity to take a quick look at a new and potentially intriguing deal involving American Express (NYSE: AXP) and Lianlian, a Chinese firm that helps mobile users add money to their accounts. Followers of big global banks like Citibank (NYSE: C), Bank of America (NYSE: BAC) and Royal Bank of Scotland (London: RBS) know that most of those names have spent the last few years trying to salvage their core operations at home, following the global financial crisis that saw most nearly driven to insolvency and only surviving with massive government bailouts. Against that backdrop, the only major activity we’ve seen from those banks in China in the last 3 years has been their sale of early stakes they took in China’s big 4 banks before they went public, with Bank of America and RBS both selling such stakes to raise cash. (
