China Construction Bank (CCB), China's second largest bank by assets, plans to spend up to 100 billion yuan ($15.84 billion) purchasing a stake in a foreign peer, the Financial Times (FT) reported Sunday, the latest sign of domestic retail banks' ongoing efforts to forge inroads overseas.
Wang Hongzhang, CCB's chairman, said the State-owned bank hopes to purchase an overseas bank outright, although it would be willing to accept a 30 to 50 percent position in a larger European institution if a complete buyout was not feasible, according to the FT. Wang did not reveal any potential targets or a timetable for a deal, however he did say that banks in the UK, Germany and France were the most attractive, the FT reported.
If CCB spends all of the 100 billion yuan in capital it has set aside for an overseas purchase, the deal would become the largest of its kind, shattering the $5.5 billion record held by Industrial and Commercial Bank of China (ICBC) for its purchase of a 20 percent stake in South Africa's Standard Bank in 2007.
CCB's ambitious goal can partly be interpreted as a response to the accelerating pace of overseas expansion seen recently among its domestic rivals, Wu Hong, deputy dean of the School of Economics and Law at China University of Political Science and Law, told the Global Times.
In July, ICBC completed the purchase of an 80 percent stake in the Bank of East Asia (BEA), marking the first time a Chinese bank became a majority shareholder in a US-based counterpart. Prior to this, in May, Bank of China (BOC) and Agricultural Bank of China (ABC) were both granted permission by the US Federal Reserve to create new branches in the US, the latter of which opened up a new branch in the country in August, according to local media reports.
"Compared to ICBC and BOC, CCB has lagged behind in overseas development," Wu said, who noted that ICBC and BOC have established a presence to over 30 countries and regions respectively, while CCB has only established nine branches and two offices outside of China.
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