Increasing trade, investment in yuan drives Chinese bank's expansion

The world's largest bank by market value, the Industrial and Commercial Bank of China, is accelerating its European expansion by tapping into new business areas such as private and investment banking.

This month in Paris ICBC is opening its private business center, to be followed next year by one for European investment banking, says Xiao Yuqiang, general manager of ICBC Europe SA Paris Branch.

"We want to strengthen our presence in Europe and explore new business opportunities to meet our clients' increasing demand for more sophisticated financial services, such as investment banking and asset securitization," Xiao says.

"The move reflects our view that Europe still holds a lot of business opportunities for us."

In the past two years ICBC has opened five branches in Paris, Brussels, Amsterdam, Milan and Madrid. It will open two more, in Warsaw and Barcelona, this month.

In May the bank opened a cash management center in Paris that enables the bank to offer services, including loan and cash flow management and cross-border settlements to its clients in Europe and Africa.

Xiao says that business in yuan is the key business of ICBC in Europe and is growing fast.

The total value of cross-border yuan settlement in France reached about 7 billion yuan ($1.12 billion; 881 million euros) last year, and up to 40 percent of it was settled by ICBC's Paris Branch, Xiao says.

The rapid growth of yuan business is mainly driven by the expansion of overseas investment by Chinese enterprises and the rising international interest in yuan-denominated products, he says.

While London and Singapore are keen to develop as offshore yuan trading centers, the French government has also expressed interest in building Paris into a European center for yuan trade.

Major Chinese banks such as ICBC and Bank of China are in talks with the French Finance Ministry and the Paris Financial Markets Organization to set up a yuan trading center in Paris. Developments are expected in the first half of next year.

"China accounts for about 14 percent of global trade, while the yuan only accounts for less than 2 percent in global trade settlement," Xiao says. "This means that there is huge potential for the yuan business to develop."

Meanwhile, the continuing economic woes and debt crisis in Europe are offering Chinese banks opportunities to acquire undervalued assets and to gain market share in Europe.

Asked about merger and acquisition plans in Europe, Xiao says ICBC will be particularly interested in European assets that complement or enrich the bank's business portfolio in the region. Industry analysts said that ICBC may target financial institutions with core business in asset management and private banking, or assets in Europe that would help enhance its capital liquidity and adequacy ratio.

lixiang@chinadaily.com.cn

(China Daily 11/16/2012 page16)