China Construction Bank Corp (中國建設銀行) agreed to buy Bank of America Corp's Hong Kong and Macau unit for HK$9.7 billion (US$1.24 billion), the largest acquisition by a Chinese lender outside the country.
China's third-largest bank said in a statement the purchase is a step toward creating a "leading international lender."
The Beijing-based bank will pay cash for Bank of America (Asia) Ltd, gaining 17 outlets with HK$7.4 billion of net assets.
Chinese lenders are expanding in Hong Kong to prepare for competition with global banks, after decades of fraud and lax lending controls led to at least US$520 billion in bad loans. Bank of America, seeking access to the world's fourth-largest economy, last year bought a 9 percent stake in the lender for US$3.3 billion and agreed to assist its management.
"Hong Kong is a good market to buy into," said David Astor, who is on the management team of the US$94 million Hiscox Far Eastern Financial Fund at Hiscox Investment in London. "In international terms, Hong Kong banks are very profitable, highly regulated and well capitalized."
The acquisition reflects the growing clout of China's banks. China Construction has a market value of US$97.6 billion, making it the world's 11th biggest bank, ahead of BNP Paribas.
China's lenders are overhauling their management and technology to cast off a legacy of bad loans caused by decades of state-directed lending.
Moody's Investors Service estimates the government spent
3.5 trillion yuan (US$439 billion) bailing out banks since 1998.
China Construction now has five outlets in Hong Kong, compared with about 14,250 in China. The bank raised US$9.2 billion in an initial public offering last year.
Shares of Construction Bank were down 0.6 percent to HK$3.339 at the close of business yesterday in Hong Kong. The shares have gained 44 percent since they began trading in November, outpacing the 17 percent increase of the Hang Seng Index.
"The acquisition fits with our international strategy and significantly enhanced our scale and market position in Hong Kong," Guo Shuqing (
Buying Bank of America (Asia) pushes China Construction Bank into ninth place in Hong Kong, with HK$96 billion of assets, from 18th, the company said in a statement, citing Hong Kong Monetary Authority figures.
The investment represents 1.32 times the Hong Kong subsidiary's net assets as of Dec. 31. Bank of America (Asia), set up in 1912, focuses primarily on serving individual customers, and had net income of HK$537 million last year. Hong Kong's banks trade at an average price-to-book ratio of 2.7 times, according to data compiled by Bloomberg.
"It's a good buy," said Kent Yau, deputy head of research at Core Pacific-Yamaichi International in Hong Kong. "Since Bank of America has been in Hong Kong for some time, the bank knows how to do its wealth management business."
Charlotte, North Carolina-based Bank of America, the world's second-biggest bank by market value, closed its only retail branch in China in December and agreed to a seven-year alliance in the country with Construction Bank.
The transaction "allows us to concentrate our capital and resources on retail banking in markets where we have significant market share," said Gregory Curl, an executive at Bank of America.
"It allows CCB to have a platform from which to continue to grow in the Hong Kong and regional market," he said.
PATENTS: MediaTek Inc said it would not comment on ongoing legal cases, but does not expect the legal action by Huawei to affect its business operations Smartphone integrated chips designer MediaTek Inc (聯發科) on Friday said that a lawsuit filed by Chinese smartphone brand Huawei Technologies Co (華為) over alleged patent infringements would have little impact on its operations. In an announcement posted on the Taiwan Stock Exchange, MediaTek said that it would not comment on an ongoing legal case. However, the company said that Huawei’s legal action would have little impact on its operations. MediaTek’s statement came after China-based PRIP Research said on Thursday that Huawei filed a lawsuit with a Chinese district court claiming that MediaTek infringed on its patents. The infringement mentioned in the lawsuit likely involved
Taipei is today suspending work, classes and its US$2.4 trillion stock market as Typhoon Gaemi approaches Taiwan with strong winds and heavy rain. The nation is not conducting securities, currency or fixed income trading, statements from its stock and currency exchanges said. Authorities had yesterday issued a warning that the storm could affect people on land and canceled some ship crossings and domestic flights. Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) expects its local chipmaking fabs to maintain normal production, the company said in an e-mailed statement. The main chipmaker for Apple Inc and Nvidia Corp said it has activated routine typhoon alert
GROWTH: TSMC increased its projected revenue growth for this year to more than 25 percent, citing stronger-than-expected demand for AI devices and smartphones The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday raised its forecast for Taiwan’s GDP growth this year from 3.29 percent to 3.85 percent, as exports and private investment recovered faster than it predicted three months ago. The Taipei-based think tank also expects that Taiwan would see a 8.19 percent increase in exports this year, better than the 7.55 percent it projected in April, as US technology giants spent more money on artificial intelligence (AI) infrastructure and development. “There will be more AI servers going forward, but it remains to be seen if the momentum would extend to personal computers, smartphones and
Catastrophic computer outages caused by a software update from one company have once again exposed the dangers of global technological dependence on a handful of players, experts said on Friday. A flawed update sent out by the little-known security firm CrowdStrike Holdings Inc brought airlines, TV stations and myriad other aspects of daily life to a standstill. The outages affected companies or individuals that use CrowdStrike on the Microsoft Inc’s Windows platform. When they applied the update, the incompatible software crashed computers into a frozen state known as the “blue screen of death.” “Today CrowdStrike has become a household name, but not in