The deal is worth recalling, partly because it has not been surpassed in terms of China/Africa acquisitions in the intervening 10 years.
It is also worthy of review because of the sometimes unexpected ways it has worked for ICBC.
Even if you only look at it as an investment play, it has yielded a better return than any bond the bank could have put the money in; it has led it into $26 billion of deals in a decade; and it also unexpectedly created an opportunity to buy a ready-made global markets and Latin America business.
But it is also interesting for what has not followed it. The deal was expected to herald a decade of Chinese banks going out into the world and acquiring. That, largely, hasn’t happened.
There have been exceptions, notably Citic Securities buying CLSA in Hong Kong, but that is still a Greater China play; and you might point out that HNA now holds 10% of Deutsche Bank, but HNA, whatever else it might be called, is not a bank (in fact it started life as a regional airline).
Indeed, if there is an M&A trend, it is Chinese entities that are not banks buying banks. The most recent big acquisition of a foreign lender, 90% of Banque Internationale à Luxembourg, was by Legend Holdings, which owns computer group Lenovo. And Fosun, which holds a 24% stake in Portugal’s Millennium BCP, is best known for its holdings in Club Med and Cirque du Soleil, not international banking.
It is true that Chinese banks can claim to be globally connected and relevant. Bank of China has branches or operations in 51 countries, ICBC 42 and China Construction Bank 29. But to a large extent these things have been done organically.
So, where are the big deals? Why haven’t the big Chinese lenders gone out into the world and bought chunks of established leaders like ICBC did with Standard Bank?
It doesn’t help that Chinese banks face regulatory resistance if they try to buy in the west, or that the Chinese authorities have clamped down on outbound M&A amid concerns over capital flight. But surely there is room for strategic moves in such a core sector?
When ICBC became a controlling shareholder in Bank of East Asia’s US subsidiary, the first instance of a Chinese financial institution assuming control of any US bank, it came a good two years after the deal’s initial agreement, almost all of it spent in gaining regulatory approvals. And that was a tiny deal: it cost about $140 million.
Might things be changing?
In July, CICC, China’s largest home-grown investment bank, agreed to buy a majority stake in the asset management firm Krane Funds Advisors, a small US exchange-traded fund provider. In fintech, Ant Financial’s bid for MoneyGram, also in the US, is truly transformative but still awaiting approval.
But it would not be a surprise to find China’s biggest lenders directed to do more.
Belt and Road
Xi’s opening speech ran to 32,000 words and used the word ‘great’ 75 times, along with copious mentions of the Belt and Road Initiative. The speech also reiterated his ambition that China should take a greater role on the global stage, illustrated by the launch of the Asian Infrastructure Investment Bank, China’s home-grown multilateral.
If that is really the vision, to take the global role that the US now seeks to sidestep, it is worth remembering just how much American influence in the world was aided by the power, scale and influence of its banks and its currency.
Xi’s grand idea may need a grander international presence for his country’s banks – and more deals like the one we saw 10 years ago.