Chinese banks: Hong Kong scramble
There seems little doubt that the first meaningful moves outside China by state lenders are likely to take place in Hong Kong. China’s special administrative region enjoys all the trappings of a sophisticated western banking market but crucially also has a close cultural affinity with the mainland.
Despite some modest initial deals, the real prizes in Hong Kong are yet to be won. The problem is that with so few available targets being chased by perhaps as many as 10 of China’s largest banks, the process risks descending into an unseemly scramble for a slice of Hong Kong’s lucrative yet elusive banking pie.
"There are really only about five targets left," says a Hong Kong-based investment banker. "The most obvious are the family-controlled banks. But that story is two decades old. They should sell, but they haven’t yet. It could happen soon, but I don’t think so. Bank of East Asia [BEA] is the obvious target: it’s the largest of the independents and has no major shareholder."
One banking analyst believes that BEA is in the sights of all of China’s main banks. Any precipitant move by one bank is likely to trigger a bidding war.
"All the banks save Bank of China need to beef up in Hong Kong," he says. "They really all want to buy BEA. All the other Hong Kong deals are tiny.