China’s ICBC may acquire local bank

The Industrial and Commercial Bank of China is looking at the possibility of acquiring a Philippine bank and setting up branches in the country, the Bangko Sentral ng Pilipinas (BSP) said yesterday.

BSP Deputy Governor Nestor Espenilla Jr. said ICBC has made inquiries about the country’s banking laws, branching regulations and taxation laws.

“It’s all exploratory at this point but they are open to the idea of establishing a presence in the Philippines,” Espenilla said. “Mostly they want to know about what our banking rules look like and also taxation.”

ICBC is the world’s largest bank by market value and its presence in the Philippines would merely expand China’s increasingly vast interests in the country.

According to Espenilla, however, nothing definite was being discussed and no specific bank was mentioned during ICBC’s exploratory talks with the BSP.

ICBC, however, would have to acquire an existing bank to be able to operate in the Philippines since foreign banks are required to partner with local investors.

Gao Xiangyang, ICBC’s head of global and acquisition team and Wang Wendin, deputy general manager, have already met with finance officials earlier to discuss taxation issues.

Founded in 1984, ICBC has been heavily involved in industrial and commercial credits and savings businesses originally transacted by the People’s Bank of China.

ICBC successfully listed in both cities of Shanghai and Hong Kong simultaneously in 2006. Now the biggest commercial bank in China, ICBC also provides diversified, professional financial services to corporate and personal customers.

ICBC is also involved in financing services for international and domestic trading financing procedures; international settlement and trade financing for centralized operation schemes.

In 2007, ICBC’s trading finance from domestic branches reached $32 billion, an increase of 132.9 percent.

Foreign banks in the country have been performing significantly better, sustaining record-high profits in 2006 from trading government securities amidst declining interest rates and from high-margin but low-risk consumer lending.

The latest available report submitted by the BSP to Congress revealed that foreign banks yielded a net income after tax (NIAT) of P12 billion, up 37.7 percent from P8.7 billion in 2005.

The BSP detailed this in the Annual Report on the Implementation of Republic Act No. 7721 (An Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines and for Other Purposes).

The BSP said in the report that strong trading gains allowed banks to rake in profits as well as the resumption of lending activities.

The BSP said the general decline in interest rates on debt securities and the substantial foreign exchange transactions translated in huge trading income which soared by 180.6 percent and propelled the industry’s non-interest income by 48.3 percent.

On the other hand, the BSP said the fee-based income of foreign banks grew by 12.2 percent and contributed almost P1 billion to their non-interest income.

Meanwhile, the BSP said interest income from lending rose more modestly by 8.5 percent or P3.9 billion attributable to the growth in foreign bank lending.