Bank of China banks on overseas growth

A clerk counts yuan bills at a bank in Huaibei, East China's Anhui province. [Photo/IC]

International push counterbalances impact of domestic economic slowdown

Bank of China Ltd will further expand its overseas business by tapping into more profitable fields such as corporate financing and commodity hedging, which are historically dominated by financial institutions in Wall Street.

During the last three years, the bank's overseas assets rose 54 percent, accounting for 27 percent of the group's total assets. Profit before tax of the bank's overseas business increased by 5.05 percentage points, accounting for 23.64 percent of the total. Meanwhile, the nonperforming loan ratio of its overseas branches remained as low as 0.17 percent, according to Chen Siqing, president of BOC.

"The rapid development of our overseas business and diversified platforms has effectively counterbalanced the pressure of the domestic economic downturn," he said while releasing the bank's 2015 annual results.

As China's fourth largest commercial bank by assets, BOC has stepped up its strategy of internationalization, along with an increasing number of Chinese companies that are going global.

The acceleration of China's interest rate liberalization, the internationalization of the renminbi and the slowdown of the Chinese economy also spurred its rapid growth overseas.

Xu Chen, US branch director of Bank of China, said the bank may set up a new subbranch in Houston because many Chinese petroleum companies operate businesses there, and BOC may hire 100 new employees in west coast of the US this year.

The bank will move its New York branch to the center of Manhattan from the east side of the city this autumn, since the old office no longer has enough space for its employees due to the huge growth in its business, The Wall Street Journal reported.

Compared with its fellow banks, BOC has a relatively higher percentage of overseas assets. That also gave it an advantage in facing the challenge brought by China's interest rate liberalization, Chen Siqing said.

"In the last three years, we had the minimum narrowing of net interest margin among our peers. The decrease of our return on assets was also the lowest," he said.

The bank has expanded its global reach to 46 countries and regions, adding five more countries in 2015. The layout now includes 18 countries along the Belt and Road Initiative, which refers to the Silk Road Economic Belt and 21st Century Maritime Silk Road, with three more added to the map last year.

Tian Guoli, chairman of the BOC, speaking at a news conference on the bank's 2015 interim results, said: "We'll further increase our branches in South Asia, Central Asia, West Asia, Central and Eastern Europe, as well as North Africa, to build the arteries of the financial system. In particular, we'll try to expand our network to more than half of the countries along the routes of the Belt and Road Initiative."

Last year, the bank granted $28.6 billion in credits to clients along the routes of the initiative, followed up 330 major projects and expressed the intent to lend $87 billion. It also raised the equivalent of $4 billion by issuing the world's first "Belt and Road" bond in the international market.

BOC is joined by several other large Chinese commercial lenders in making steady progress with their internationalization strategy, expanding their global footprint and improving their capabilities in cross-border financial services.

For example, Industrial and Commercial Bank of China Ltd acquired a 60 percent stake in Standard Bank PLC, the UK branch of South Africa-based Standard Bank Group Ltd, thus officially stepping into global commodities and money market trading business.