ICBC sets tone as it takes over US bank
Updated: 2011-01-25 07:51
By Eva Woo and Shelley Smith (China Daily)
The lender is to acquire 80 percent of a Bank of East Asia retail unit
BEIJING - Industrial and Commercial Bank of China Ltd (ICBC) has agreed the first Chinese takeover of a US retail bank, boosting financial ties between the world's two largest economies as President Hu Jintao concluded a four-day visit to the nation.
ICBC, the world's biggest lender by market value, will buy 80 percent of Bank of East Asia Ltd's US unit for $140 million, the companies said on Sunday. Both banks are seeking regulatory approval in the United States and China for the transaction, according to their statement.
The acquisition gives ICBC 10 branches in California and three in New York, providing a platform for growth in the US. The deal was one of as many as 60 signed between Chinese and US companies during Hu's visit as he met executives from both nations to promote closer economic relations.
"It's no coincidence that the timing of the announcement of this deal comes while President Hu Jintao is visiting the US," Mike Werner, a Hong Kong-based senior analyst at Sanford C. Bernstein & Co, wrote in a note.
"From a political standpoint, it will be an interesting development to see if ICBC is granted approval" to buy the assets, he said.
Hu concluded his trip with a signing ceremony in Chicago on Saturday. China's Commerce Minister Chen Deming said that deals worth $25 billion were being reached between US and Chinese companies during the visit, excluding an accord with Boeing Co.
The deal between Beijing-based ICBC and Bank of East Asia, based in Hong Kong, may give financial companies in both China and the US greater access to each others' markets, said Chip MacDonald, a partner a the law firm Jones Day in Atlanta.
The US Federal Reserve Board will have to make a determination, under the Bank Holding Company Act, that China's central bank has enough information on ICBC's operations to supervise its financial condition and compliance with the law, MacDonald said.
ICBC opened its first branch in the US in October 2008. The Chinese lender last week opened five branches in Europe, doubling its presence in the region to nine countries.
The acquisition "will enable us to establish a solid presence in the US," ICBC Chairman Jiang Jianqing said in the statement. "With this commercial bank license in the US, ICBC can further expand its retail banking business and operating network across the nation."
President Hu Jintao is on a state visit to the US from Jan 18 to 21.
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