Over­seas banks have great H1 in China as ren­minbi deals surge

Global lenders cash in on ris­ing busi­nesses from do­mes­tic and for­eign com­pa­nies, re­port in Bei­jing and in­Hong Kong.

China Daily (Canada) - - BUSINESS -

Many over­seas banks re­ported dou­ble-digit profit growth in China in the first half of 2014 thanks to a rapid in­crease in cor­po­rate bank­ing and cross­bor­der ren­minbi busi­ness. Lon­don-based Stan­dard Char­tered Plc saw its China in­come go up 15 per­cent yearon-year to $515 mil­lion and its be­fore-tax op­er­at­ing profit rise 65 per­cent to $193 mil­lion.

HSBC Hold­ings Plc, also head­quar­tered in Lon­don, an­nounced a 64 per­cent yearon-year in­crease in profit be­fore tax for its Chi­nese main­land op­er­a­tions.

Bank of EastAsia Ltd saw­its profit be­fore tax for main­land op­er­a­tions grow by 25 per­cent to HK$1.54 bil­lion ($199 mil­lion) as of June 30, the bank said.

And DBS Group Hold­ings Ltd, the for­mer Devel­op­ment Bank of Sin­ga­pore and South­east Asia’s largest lender, re­ported its net profit for the Chi­nese main­land and Tai­wan rose to $160 mil­lion in the first half, up from $58 mil­lion in the same pe­riod of 2013. Its in­come in the same re­gion posted growth of 42 per­cent to $503 mil­lion, as both net in­ter­est and non-in­ter­est in­come rose.

Ken­nyWen, chief strate­gist for SunHung Kai Fi­nan­cial, a Hong Kong-based wealth man­ager, said the profit gains that over­seas banks achieved on the Chi­nese main­land can be at­trib­uted to growth in cor­po­rate bank­ing busi­ness as well as lower op­er­at­ing costs.

Cross-bor­der ren­minbi busi­ness also picked up steam on the main­land af­ter the daily trad­ing range of the cur­rency was widened in March to 2 per­cent from its pre­vi­ous band of 1 per­cent.

“Many over­seas banks, be­cause of their multi­na­tional busi­ness, wit­nessed strong growth in yuan loans and op­tions,” Wen said.

With progress also

be­ing made in the China (Shang­hai) Pilot Free Trade Zone, along with ef­forts to­ward open­ing up China’s cap­i­tal ac­count, Wen ex­pects ren­minbi busi­ness will con­tinue to pick up as growth in the off­shore ren­minbi pool ac­cel­er­ates.

Stan­dard Char­tered saw strong cor­po­rate client ac­tiv­i­ties, cross-bor­der trades and a steady in­crease in ren­minbi busi­ness dur­ing the first six months of 2014 de­spite China’s economic slow­down, said Jerry Zhang, CEO and ex­ec­u­tive vice-chair­man of Stan­dard Char­tered Bank China.

“In par­tic­u­lar, we had a strong per­for­mance in trans­ac­tion bank­ing, ben­e­fit­ing from trade vol­ume growth, and in as­sets and li­a­bil­i­ties man­age­ment, ben­e­fit­ing from our global lead­er­ship po­si­tion in the in­ter­na­tion­al­iza­tion of the yuan,” Zhang said.

Stan­dard­Char­tered be­came one of the first mar­ket-mak­ers for di­rect trad­ing between the yuan and the Bri­tish pound. It was also among the first batch of banks to launch cross-bor­der ren­minbi loans in the Suzhou In­dus­trial Park in Jiangsu prov­ince.

The bank teamed up with clients to con­duct the first non-quota-based yuan-de­nom­i­nated two-way cross-bor­der sweep­ing trans­ac­tion in the Shang­hai FTZ.

Zhang said the bank will con­tinue to in­vest in China and ex­pand its ser­vice net­work.

Along with pro­vid­ing sup­port to small and medi­um­sized en­ter­prises and high­netindi­vid­u­als, it will help for­eign com­pa­nies en­ter and ex­pand in China, and as­sist Chi­nese en­ter­prises in ex­plor­ing over­seas mar­kets, he said.

Bank of EastAsia recorded a huge in­crease in fee in­come gen­er­ated from cor­po­rate cus­tomers. Com­pe­ti­tion for de­posits in­ten­si­fied in the first half of this year, driv­ing up fund­ing costs. This ex­erted pres­sure on BEA China’s net in­ter­est mar­gin, which fell by 24 ba­sis points from the sec­ond half of 2013, the bank said in an­nounc­ing its 2014 in­terim re­sults.

To op­ti­mize busi­ness po­ten­tial, BEA China shifted its fo­cus from ex­pand­ing its on­shore loan port­fo­lio to ar­rang­ing off­shore loans for clients re­quir­ing fund­ing for over­seas busi­ness ex­pan­sion.

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