March 16 PM, Industrial and Commercial Bank of China Limited and Goldman Sachs Group convened the Strategic Cooperation Kick-Off Meeting in Beijing. ICBC Spokesperson stated that this was a significant move for both parties to fulfill the strategic investment and cooperation agreement signed before, and it marked such cooperation between both parties entered a practical implementing phase.
ICBC Spokesperson related to the press that the cooperation between ICBC and Goldman Sachs would cover fields such as corporate governance, risk management, capital trading, assets management, corporate and investment banking, non-performing loan management and staff training.
A Joint Steering Committee guiding strategic cooperative projects has been established by ICBC and Goldman Sachs to ascertain both parties achieve substantial results on the strategic cooperation projects. Mr. Yang Kaisheng, President of ICBC, and Mr. Michael Evans, CEO of Goldman Sachs Asia, were the co-Chairman of the Committee.
Meanwhile, ICBC and Goldman Sachs set up 7 joint-working teams to oversee the project's implementation details. The 7 teams focus respectively on: Corporate Governance, Risk Management, Capital Trading, Asset Management, Corporate and Investment Banking, Non-Performing Loan (NPL) Management and Staff Training.
Further, ICBC (Asia) an ICBC holding company listed in Hong Kong, will also work with Goldman Sachs in such areas as debt issuance and financing. Another point worth mentioning in the design of Strategic Cooperation Project Framework between both parties is the Project Management Office installed between Steering Committee and Working teams.
This Office is especially in charge of liaison and coordination and to monitor the progress of the cooperation projects.
A related person disclosed that the project co-operation between ICBC and Goldman Sachs was down to every detail. Each team leader made thorough explanations on the cooperation objectives, measures and timetable are laid out. In Corporate Governance, Goldman Sachs will assist ICBC to establish an international-compliant management system in information disclosure, related party transactions and investor relationship, enhance ICBC Internal Control and Audit Supervisory Scheme, and create a scientific, highly-efficient organization structure and reporting route.
In Risk Management, Goldman Sachs will assist ICBC to develop and upgrade its comprehensive risk management system, and provide technical support in such areas as credit risk, market risk, liquidity risk, operation risk, credit asset portfolio management. In Asset Management, Goldman Sachs will assist ICBC to improve its management of assets, investment analysis, risk control and performance appraisal system, and shared with ICBC the main investment varieties in global capital market and the development experience of mature market.
In Corporate and Investment Banking business, ICBC and Goldman Sachs will establish a channel for cross-referral of customers and cooperation mechanism in the areas of restructuring and acquisition, asset securitization, direct investment, stock and bond underwriting and consultancy. Mr. Roland Tegeder, Head of Strategic Trading Group of Goldman Sachs Asia gave an introduction on the cooperation details in asset business.
He indicated that Goldman Sachs will assist ICBC in developing and designing products, but the more important is to improve ICBC staff to face real-world situations. Taking staff training as an example, ICBC capital traders will be work with Goldman Sachs dealers on the same trading platform to feel the market.
ICBC and Goldman Sachs Investment Group (including The Goldman Sachs Group, Inc., Allianz Group and American Express Company) signed the Strategic Investment and Cooperation Agreement on January 27 this year. Goldman Sachs Investment Group invested USD 3.78 billion to buy nearly 8.45% of ICBC shares.
Back in October 2004, ICBC already started working on introducing strategic investment and cooperation. Since then, ICBC always looked for potential strategic investors who can help ICBC meet its needs of development strategy and contribute to ICBC corporate governance, risk management and product innovations.
Arrange strategic investment syndicate, bring in strategic investment and matching strategic cooperation were the standpoints for ICBC selecting strategic investors.
At the ICBC and Goldman Sachs Strategic Cooperation Kick-Off Meeting held on March 16, Mr. Jiang Jianqing, Chairman of ICBC, said, "ICBC brings in strategic investors is not simply looking for some capital. Rather, it is more important to bring in internationally state-of-art management concepts and technologies to strengthen corporate governance. The cooperative relationship between ICBC and its strategic partner is long-term, complementary and strategic matching. The strategic cooperation between ICBC and Goldman Sachs is definitely a win-win situation for both joining forces."
Mr. Yang Kaisheng, President of ICBC, remarked, "ICBC introducing Goldman Sachs Group as the complementary strategic cooperation partner has set another new pattern for State-owned commercial bank to attract strategic investment." He stressed that strategic cooperation was a crucial part to ICBC to attract strategic investment. Both parties have to strengthen leadership and execution capacity in order to ensure the success of the cooperation project.
In the comment on the strategic cooperation with ICBC, Mr. Michael Evans, CEO of Goldman Sachs Asia, said, "Goldman Sachs made a full commitment to ICBC on the strategic cooperation. All of us will exert to our utmost. To this end, Goldman Sachs gathered its strongest force around the world to constitute the most professional team to take charge of the implementation of every project. Goldman Sachs has never made what we have committed to ICBC to any other partners before. ICBC is worth of our efforts."
Insiders viewed that competition among financial peers will be much intense as globalization of economy and China financial reform go further. Trends in cross-selling and consolidation operation among commercial banks are getting common. Commercial banks grow by taking deposits, offering loans and earning interest spread will have difficulty in facing the coming fierce market competition.
Right now, China banking sector is in a critical strategic transformation period. Diversification in business structure and profitability structure is important strategic transformation items. In particular, capital trading, asset management, personal finance, product innovation, investment banking, cooperation between bank and insurance, credit cards are all target emerging sectors needed to be massively upgraded.
Analysts stated that the cooperation of ICBC and Goldman Sachs drew up a new pattern for China large commercial banks to bring in strategic investors, since Goldman Sachs and ICBC has nothing to compete in business structure and are complementary. Their cooperation will be mostly driven by mutual benefit and winning together for years to come.
Moreover, Goldman Sachs has made many significant and conditional project commitments to ICBC and both of their teams have been working together for some time. This will secure the success of the cooperation between these two large financial institutions.
Insiders are generally optimistic about the join-hands of ICBC and Goldman Sachs this time. They regard Goldman Sachs as an investment bank with the longest history, strongest base and most distinguished results in the world, as well as an internationally famous financial group engaged in investment banking, securities trading and investment management as a whole.
ICBC is deemed as a commercial bank with the largest asset scale, broadest customer base and most advanced product technology in China. The close strategic cooperation between two parties will greatly accelerate the pace to transform ICBC into a modern commercial bank that can compete internationally.
It will also let strategic shareholders share the result from the high growth of China economy and China banking sector and maximize their investment value.
News Link:
The Cooperation Project on Corporate Governance: Goldman Sachs will share with ICBC the best practices in corporate governance, internal control, compliance management and human resources management, assist ICBC to build an effective corporate governance organizational framework and reporting scheme, expand and complete internal control and auditing function, enhance level of ICBC human resources management, assist ICBC to establish a management system of information disclosure, related party transactions and investor relationship according to the requirement of the place where ICBC will be listed.
The Cooperation Project on Risk Management: Goldman Sachs will assist ICBC to improve, develop and furnish risk management system, provide technical support and training to ICBC on overall risk management framework, credit risk, market risk, liquidity risk, operation risk, related party transaction risk, environmental risk management and credit asset portfolio management.
The Cooperation Project on Capital Business: ICBC and Goldman Sachs will cooperate in fields of financial products and derivatives trading such as interest rates, exchange rates, commodities, design and develop finance products jointly. Goldman Sachs will assist ICBC to create and furnish the trading platform for its financial products and derivatives and to improve its product pricing capacity. Related risk management system will be developed with corresponding consultancy and training services offered as well.
The Cooperation Project on Asset Management: Goldman Sachs will assist ICBC to offer diversified asset management services to companies, institutions and retail customers in a much effective manner and to develop and furnish its business risk management system. Goldman Sachs share with ICBC the best practices in custody business. Business cooperation opportunities will be actively explored to jointly develop money market fund and offshore capital management.
The Cooperation Project on Corporate and Investment Banking Business: ICBC and Goldman Sachs will establish a channel for cross-referral of customers and a cooperation mechanism in the areas of restructuring and acquisition, asset securitization, direct investment, stock and bond underwriting, consultancy, research and development.
The Cooperation Project on Non-Performing Loan (NPL) Management: Goldman Sachs will work with ICBC in the field of non-performing loan (NPL) management, disposal and debt restructuring, and share the related experience and knowledge. Goldman Sachs will assist ICBC to institute and complete the procedures and system in the NPL restructuring, debt collection, equity investment disposal, collateral realization, and to establish and furnish NPL pricing and valuation system.
Cooperation Project on Training: Through all kinds of training, Goldman Sachs will share with ICBC its professional knowledge and experience in critical business areas such as corporate governance, risk management, capital trading, asset management, corporate and investment banking, NPL disposal.
