China Everbright Bank to expand retail business
By Andrew Yeh in Beijing
Published: March 19 2007 02:00 | Last updated: March 19 2007 02:00
China Everbright Bank, a mid-sized mainland lender, is planning a shift in strategy to significantly expand its retail banking business.
Li Ziqing, the bank's executive vice-president, said the retail business's share of total assets will jump from 15 per cent now to 40 per cent in about five years. The Beijing-based bank's portfolio is now dominated by corporate loans.
The resources Everbright Bank and other domestic lenders are devoting to the retail segment is evidence of the strong demand for innovative bank services from China's urban middle class.
Everbright Bank has a very small wealth management business that it is trying to grow. "This is just getting started," Mr Li said in an interview.
Its retail business was practically non-existent four years ago. Now it intends to focus on personal loans, credit cards, home mortgages and automobile loans.
Mr Li said the bank has benefited from a fast expansion of mortgage-lending in secondary cities - such as Tianjin, Dalian and Qingdao in the north - while avoiding those showing signs of overheating.
Mr Li also predicted Everbright Bank would this year more than double its total number of credit cards issued, to about 2m.
On Friday, the bank announced it had received a $500m quota to make offshore investments under the country's Qualified Domestic Institutional Investor scheme.
In recent months, there has been speculation that Standard Chartered is interested in buying a stake in Everbright Bank prior to a Hong Kong listing, which could come later this year. Neither bank has confirmed the rumour.
Everbright Bank was established in 1992 and is today ranked among the country's top 10 lenders. The bank reported through local media last month that total assets reached Rmb595.1bn ($77bn) last year, a 16.4 per cent rise from the year before.
Mr Li said the bank's revenues had grown by about 30 per cent annually in recent years.
Copyright The Financial Times Limited 2007
Warning to foreign banks in China
By Sundeep Tucker in Hong Kong
Published: March 19 2007 02:33 | Last updated: March 19 2007 02:33
Intense competition in China could prevent foreign banks from profiting from their investments in credit card and mortgage ventures for another 10 years, according to a KPMG report.
More than 70 overseas banks now operate in China, having invested billions of dollars in the sector over the past five years. Several have raised expectations that local joint ventures would deliver early returns.
However, the report, partly based on a survey of foreign and local banking executives, suggests that executives are becoming increasingly bearish about the prospects of making profits from their operating ventures in the short-to-medium term, though many have earned handsome paper profits from equity stakes in state-owned banks that have listed in Hong Kong or Shanghai.
Simon Gleave, KPMG financial services partner for China and Hong Kong, said: “There is a culture of no fees. It could take 10 to 20 years to make profits. China is not the same as other markets that banks might have come across.”
Citigroup, Royal Bank of Scotland and HSBC are among the overseas banks to have launched co-branded cards with local banks, while rivals such as Bank of America and Deutsche Bank are waiting to launch.
Card transactions in China have risen massively in recent years but the growth has largely been via debit cards, 700m of which are now in circulation. China’s 1.3bn consumers have a cultural aversion to revolving credit, as well as $2,000bn in personal savings to fund purchases.
The report says: “Average merchant fees are about 60 basis points, meaning little profit for [credit card] issuers.” It offers an equally pessimistic outlook for the mortgage sector with industry players “worried that intense competition will hit profits”.
Overseas executives also accept that it will be tough to win market share from established former state-owned lenders, who boast a combined 75,000 branches nationwide.
KMPG suggests that foreign lenders adopt a “steady and prudent” entry into developed [mortgage] markets such as Beijing and Shanghai, “though fears of a property bubble are never too far from a banker’s thoughts”.
The report says that overseas lenders need to find creative distribution channels, such as mobile phone banking or partnerships with large insurance companies.
Copyright The Financial Times Limited 2007
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