China Construction Bank targets overseas growth

China Construction Bank wants to expand its overseas presence through organic growth and acquisitions, and aims to wrap up a take-over deal this year, C ha irman Wang Hongzhang told Reuters. China's second-largest bank also has its problem loans under control and expects to participate in a 1 trillion yuan ($158 billion) infrastructure spending drive announced recently by the government, Wang said in an interview.
"As chairman of the bank I would expect to complete an M&A deal this year," Wang said on the fringes of a recent Asia-Pacific summit in Russia's far eastern port of Vladivostok. Shanghai- and Hong Kong-listed CCB's overseas assets amount to only around 4 percent of its balance sheet, and the bank wants to expand abroad to serve mainly Chinese companies as they extend their reach around the world.
"The current status of our international presence does not correspond to the global status we are aiming for," Wang said in comments that were approved for publication by his office. "In the coming years, we would like to accelerate our overseas development. Now, we see the right conditions for expansion of our overseas business - the financial crisis, the European debt issue and strong growth in emerging markets."
Wang noted that CCB's strong capital adequacy ratio of 13.82 percent - the highest among China's large banks - served as a "sound basis" for expansion. CCB has 14 branches or subsidiaries abroad, a less extensive presence than China's largest bank, Industrial and Commercial Bank of China , which has operations in Hong Kong, Macau and 24 other economies.
Wang said CCB's focus would be on establishing more entities in Europe and America, while it would expand in the Asia-Pacific by both setting up new branches or through acquisitions. CCB intends to establish a US branch in San Francisco, for which it will soon submit an application. In Europe it plans a branch and a subsidiary in Luxembourg, and has applied to open a Russian subsidiary.
In the Asia-Pacific region, CCB will open an Australian branch in Melbourne in the fourth quarter of this year, and is seeking to establish a presence in Indonesia and Malaysia. "The bank's current priority is to accompany our clients going global," he said. The so-called "going out" strategy has, however, faced challenges from regulatory barriers to entry in a number of markets. Asked whether CCB was in acquisition talks, Wang declined to be specific, but said: "We have some potential targets for M&A."