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Chinese banks, global ambitions

With successful IPOs completed and the domestic economy humming, China’s banks have never been in better shape to venture overseas, and there are compelling reasons to do so. Chris Leahy reports.

Modest moves

IN DECEMBER 2006, Industrial and Commercial Bank of China (ICBC), China’s largest lender, acquired a 90% interest in Bank Halim, a small Indonesian lender. The deal hit the headlines, not because of its size – the consideration of $56 million is not even a rounding error on a balance sheet of more than $1.1 trillion – but simply because it happened at all. Chinese banks are entering the market for overseas acquisitions and they have immense firepower.

That firepower was demonstrated in a more meaningful way in August when state-owned China Development Bank announced a deal to invest up to $11.6 billion in Barclays Bank to assist in the financing of the UK lender’s bid to buy ABN Amro.

"There’s a lot out there for these banks to look at," says the head of financial institutions at a major investment bank, "with the big three banks, [ICBC, China Construction Bank (CCB) and Bank of China (BOC)], all in the top five or 10 banks by market capitalization, they certainly have the currency."

Arguably, these banks have too much money to invest, a problem that looks likely to intensify.

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