Banking News
- BoCom eyes stake in small lender
Date: 18-Jul-2007 Sources: (Shenzhen Daily)
BANK of Communications (BoCom), China's fifth-largest lender, is in talks to buy a 10 percent stake in Changshu Rural Commercial Bank in eastern China, a regulatory source said yesterday.
Bank of Communications has long been in talks with the Changshu bank in Jiangsu Province for potential investment, but no final agreement has been reached, the regulatory source said.
If successful, it would become Bank of Communications's first equity investment in another lender and would potentially allow the national bank to better serve urban and semi-rural swathes of the country, where rural commercial banks typically operate.
'The local government and regulators welcome big banks to invest in small, rural banks and encourage them to develop rural banking businesses together in Jiangsu Province,'said the source.
'Changshu bank also targets small and medium-sized enterprises for banking services, which are believed to have huge market potential,'the source added.
Another source close to Bank of Communications said the Shanghai-based lender is keen to acquire small rivals to expand its national network, but he declined to name any target.
A spokeswoman at Bank of Communications, 18.6 percent-owned by HSBC Holdings Plc., declined to comment.
Changshu bank has 40 branches and 72 sub-branches and its capital adequacy ratio stood at 11.11 percent at the end of 2006, according to the bank's Web site.
The bank, which was formed out of restructured rural credit cooperatives in 2001, had assets totaling 24.4 billion yuan (US$3.21 billion) and more than 900 employees at the end of last year.
The bank mainly serves customers in Changshu City, an urban sprawl that has a population of more than 1 million people, according to official figures. Typically, such lenders also serve semi-rural areas of the country.
The government has been pushing to lure domestic and foreign investment to the nation's 'rural?financial sector so that lending can be redirected from cities to the countryside and economic growth can become more balanced.
Last July, the World Bank's private investment arm, the International Finance Corp., agreed to buy 5 percent of a rural cooperative bank in the prosperous eastern city of Hangzhou alongside Dutch financial cooperative Rabobank, which said it would take a 10 percent share.
Both entities have been on the prowl for such opportunities.
'By size, Changshu bank is not attractive, but by the fact that it is rural, it can be a good investment as that is something the government is encouraging you to do these days,'said the second source.
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