Summary:
China, in its answer to warding off threat from foreign banks, has created the largest bank in the country. This bank is twice the size of the nearest competitor.
To put the sheer scale of this development into perspective, the reporter has smartly juxtaposed the new Chinese behemoth with its Indian counterpart – the SBI.
Content:
Times of India, 4-Nov 2007
Beijing: Chinese authorities have created the country’s largest bank and simultaneously threw up a new hurdle for the host of foreign banks scrambling to enter the newly opened retail banking market. The new bank, China Postal Savings Bank, surpasses the existing No 1 bank, the Industrial and Commercial Bank, on a two-to-one scale.
The new bank has been created by spinning off the banking business of the 87-year-old State Post Bureau, which will now focus on postal services alone. It will have a network of 36,000 outlets nationwide, which is twice ICBC’s. Banking outlets include both branches and sub-branches. India’s largest commercial bank the State Bank of India has over 14,000 branches.
Although 60% of the bank’s outlets are in rural areas, it has a formidable presence in the major cities as well. The postal banking service has had a strong base of loyal customers in China’s cities, which makes the new bank a serious challenger to both domestic and foreign banks.
The move comes within two weeks of China Banking Regulatory Commission (CBRC) lifting the iron curtain that barred foreign banks from doing business with local citizens in local currency. Within days of opening up the retail banking sector, eight foreign banks applied for permission to do business in the local currency, which would also require them to incorporate themselves locally.
Five of the applicants, HSBC, Standard Chartered, Citigroup, Hang Seng Bank and Bank of East Asia have been granted licences. Several other foreign banks are expected to apply for retail banking licences soon.
The CBRC has hailed the government decision to launch the China Postal Savings Bank, saying it was “an important achievement in China’s banking reform’’. The regulator is also expected to push the new bank, which is fully state-owned, to go in for an initial public offering to raise at least $2 billion, industry sources said.
The new bank begins life with a registered capital of 80 billion yuan ($10 billion). It also inherits substantial deposits from the postal savings system, which stood at 1.3 trillion yuan by 2005-end.
The decision to create the new bank was taken by the country’s State Council in July last year and foreign banks would have incorporated this development in their growth plans, industry sources said. But it is still a major challenge as the move comes within weeks of the foreign banks being allowed to enter retail banking. “We are special. We differ from other banks in terms of our bigger base and the kind of services we offer,’’ a source in China Postal Savings Bank said.
Meanwhile, the ICBC has announced that it has bought 90% of Bank Halim Indonesia, its first acquisition outside Greater China. ICBC raised $21.9 billion from the world’s largest IPO recently.
