ICBC extends reach to US

Industrial and Commercial Bank of China Ltd (ICBC), the world's largest bank by market capitalization, signed an agreement to acquire an 80 percent stake in Bank of East Asia's US operations for a cost of $140 million, according to a joint announcement from the two banks Sunday.
The transaction is subject to US and Chinese regulatory approval including China Banking Regulatory Commission, the Hong Kong Monetary Authority, and the US Federal Reserve Board.
The acquisition will enable ICBC to expand its retail banking business in the US and enhance its market position, said Jiang Jianqing, chairman of ICBC, in the statement.
"This unprecedented acquisition of a controlling stake in a US commercial bank by a mainland bank is strategically significant. The successful completion of this transaction mark a new era of open-market cooperation between the two countries, and have a positive impact on Sino-US trade relations," Jiang added.
"Our Bank is confident that the transaction will further optimize the allocation of our resources and strengthen our financial services in the major markets where we operate," said David Li, Bank of East Asia's chairman and CEO.
Hong Kong-based Bank of East Asia had total consolidated assets of HK$478.1 billion ($61.36 billion) as of June 30, 2010, with 13 retail-banking branches in New York and California to date.
As many of Bank of East Asia's customers are Asian Americans, so it would be relatively easy for ICBC to manage, David Wu, partner of Financial Services with PricewaterhouseCoopers (PwC) China, told the Global Times.
ICBC has 162 branches in 20 countries and regions worldwide, according to its 2009 annual report.
Its biggest deal to date came in 2007, when it bought 20 percent stake in South Africa's Standard Bank for more than $5 billion. More recently, it acquired Thailand's ACL Bank PCL and bought 70 percent of Bank of East Asia's unit in Canada.
The credit control and lending business slowdown in the domestic market will push more Chinese banks to eye overseas expansion, Guo Tianyong, a finance professor with Central University of Finance & Economics, told the Global Times.
However, PwC's Wu pointed out that Chinese banks should go for overseas carefully and with prudence as the majority of financial overseas M&As failed due to the lack of understanding of the local business market and culture, as well as the often vastly different post-deal expectations of the two parites.