Bank of China, the world's No. 6 bank by market capitalisation, is seeking acquisition opportunities to expand its British retail business, a senior executive said.
Kenneth Ge, the chief executive of Bank of China UK, the Beijing-based lender's UK arm, told Reuters in an interview that China's oldest bank is keen for growth in Europe, too.
I do think we need more networks in UK. We can take a different means, not necessarily just through organic growth, Ge said. If we have a good target, we can do it by acquisitions.
Bank of China (BOC) has injected 200 million pounds ($406 million) into its UK subsidiary which last week secured regulatory approval to offer both retail and wholesale banking.
BOC raised $9.7 billion in a Hong Kong IPO last year, followed by a 20 billion yuan ($2.67 billion) flotation on the Shanghai Stock Exchange.
Its Hong Kong-listed shares have jumped almost 56 percent since their listing to trade at 2.5 times 2008 estimated book value of 1.77 yuan, according to Reuters Estimates.
By comparison, HSBC, which generated almost three times the profit of BOC last year, trades at a forward book value of 1.79 times.
BOC UK's expansion plans come as analysts cut valuations on the Britain's retail banks, expecting lower lending volumes and thinner net interest margins due to a weaker mortgage market.
Bear Stearns expects UK-focused banks, on average, will register mid single-digits earnings growth for 2007 and 2008.
BOC UK currently has only five UK outlets which account for just 30 percent of total earnings.
The UK branch, which was set up in 1929 as China's first overseas banking unit, will maintain its status to utilise its Beijing-based parent firm's balance sheet.
Before doing the acquisitions, I'll have to make sure my team is ready to do it, said Ge, adding that he did not have a specific plan yet. EUROPEAN PASSPORT
BOC has operations in 25 countries, including France, Germany, Italy, Luxembourg and Hungary.
Having a UK subsidiary status means BOC UK now has a passport to open outlets in all European Union member states. Leveraging its close ties with the Royal Bank of Scotland, BOC UK will be the flagship for further European expansions, Ge said.
RBS holds nearly 4.5 percent in BOC and is a board member of the UK subsidiary.
BOC UK is targeting the top 200 European companies as its core client base in the wholesale business. Currently it has 40 such customers.
We act as a bridge, with European firms coming to us exploring China business opportunities and helping Chinese companies in their external strategies, Ge said.
China is the second biggest trading partner to the 27-nation European Union, which has a population of 450 million and a $12 trillion economy.