After spending more than US$16 billion on Asian acquisitions in the past decade, China’s banks still have a long way to go before their regional forays start to have a meaningful impact on earnings.
Only 9.1 percent of Asian companies outside China currently have working relationships with the nation’s top banks for cash management, according to a survey of 848 corporations by research firm East & Partners.
The survey showed 14.4 percent work with the Chinese lenders for trade finance.
Given that it was a first-time study, the firm had no comparable historical data.
“Definitely, it’s disappointing,” Singapore-based East & Partners senior analyst Jonathan Chng said. “They have spent so much money trying to penetrate the overseas market and to expand into non-Chinese corporate customers, but the result is still not very favorable to them.”
While China is already the biggest trading partner for Asian countries from India to Japan, Chinese banks have struggled to compete with the wider range of products long-established rivals in the region such as HSBC Holdings PLC and Standard Chartered PLC offer to customers.
The state-owned lenders’ overseas plans — initially intended to support the global use of the yuan and the financing of Chinese infrastructure projects offshore — have taken on greater significance as a weaker economy and rising soured debt hobbles profit growthat home.
Growing use of the yuan in international business seems to have some bearing on how Asian companies engage with Chinese banks; 28.7 percent of the firms in the East & Partners survey had a working relationship with the lenders for foreign exchange, the biggest connection to mainland banks.
Just over 17 percent had banking relationships for investment services, rounding out the four business areas covered by the survey.
The more than US$16 billion of Asian acquisitions by Chinese lenders in the past 10 years includes Industrial & Commercial Bank of China Ltd’s (ICBC, 中國工商銀行) purchase of Bank Halim Indonesia, which was completed in 2007, data compiled by Bloomberg show.
More recently, China Construction Bank Corp (CCB, 中國建設銀行) took a controlling stake in Indonesia’s PT Bank Windu Kentjana International late last year, while China Minsheng Banking Corp (中國民生銀行) won approval earlier this month to buy Quam Ltd, a Hong Kong-based brokerage and financial-services provider.
ICBC does not provide a breakdown of its Asian profits. Its interim report showed that its overseas business accounted for 6.6 percent of operating income in the first half of last year, up from 2.3 percent in 2006, before its Bank Halim acquisition.
CCB, China’s second-largest bank by assets, is seeking to expand its network to about 40 countries from 24 and increase the overseas contribution of pretax profit to 5 percent by 2020, chairman Wang Hongzhang (王洪章) said.
The overseas business only accounted for 1.79 percent of the firm’s pretax profit in the first half of last year, up from 0.83 percent in 2006, exchange filings show.
“We are accelerating the pace to internationalize and to provide global financial services,” Wang said in Hong Kong in October last year. “We are taking the opportunity of companies expanding overseas and the renminbi internationalization to strengthen our global competitive position.”
Operations outside mainland China contributed 3.2 percent of Agricultural Bank of China Ltd’s (中國農業銀行) total operating income in the first half of last year, and 23 percent of Bank of China Ltd’s (中國銀行) pretax income. Bank of China’s Hong Kong unit is the territory’s top mortgage lender.
Concerns over deteriorating asset quality as the country’s economy slows had dragged shares of the four banks down by an average 15 percent in Hong Kong this year to Thursday.
“In China, although the market is very big, there are a lot more opportunities overseas,” Chng said.
Chinese banks “still have a lot of work to do in order to be on the same level as international banks,” he said.
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
ARTIFICIAL INTELLIGENCE: The chipmaker last month raised its capital spending by 28 percent for this year to NT$32 billion from a previous estimate of NT$25 billion Contract chipmaker Powerchip Semiconductor Manufacturing Corp (力積電子) yesterday launched a new 12-inch fab, tapping into advanced chip-on-wafer-on-substrate (CoWoS) packaging technology to support rising demand for artificial intelligence (AI) devices. Powerchip is to offer interposers, one of three parts in CoWoS packaging technology, with shipments scheduled for the second half of this year, Powerchip chairman Frank Huang (黃崇仁) told reporters on the sidelines of a fab inauguration ceremony in the Tongluo Science Park (銅鑼科學園區) in Miaoli County yesterday. “We are working with customers to supply CoWoS-related business, utilizing part of this new fab’s capacity,” Huang said, adding that Powerchip intended to bridge
Microsoft Corp yesterday said that it would create Thailand’s first data center region to boost cloud and artificial intelligence (AI) infrastructure, promising AI training to more than 100,000 people to develop tech. Bangkok is a key economic player in Southeast Asia, but it has lagged behind Indonesia and Singapore when it comes to the tech industry. Thailand has an “incredible opportunity to build a digital-first, AI-powered future,” Microsoft chairman and chief executive officer Satya Nadella said at an event in Bangkok. Data center regions are physical locations that store computing infrastructure, allowing secure and reliable access to cloud platforms. The global embrace of AI
Qualcomm Inc, the world’s biggest seller of smartphone processors, gave an upbeat forecast for sales and profit in the current period, suggesting demand for handsets is increasing after a two-year slump. Revenue in the three months ended in June will be US$8.8 billion to US$9.6 billion, the company said in a statement Wednesday. Excluding certain items, earnings will be US$2.15 to US$2.35 a share. Analysts had projected sales of US$9.08 billion and earnings of US$2.16 a share. The outlook signals that the smartphone market has begun to bounce back, tracking with Qualcomm’s forecast that demand would gradually recover this year. The San