Business Development Bank (BDB), a wholly foreign-owned bank focusing on lending to Chinese small and medium-sized enterprises (SMEs), is planning to raise its capital and applying for an expanded renminbi-business licence.

The Shanghai-headquartered bank will submit its application to the China Banking Regulatory Commission (CBRC) next month, said Michael Askew, BDB president.

The expanded licence will enable BDB to offer renminbi loans to Chinese-owned enterprises. In September 2004, BDB began to offer renminbi credit to foreign-invested companies.

The expanded licence requires a minimum registered capital of US$80 million. "We currently have US$70 million, and will add another US$11 million," said Askew.

Two shareholders of BDB, Charoen Pokphand Group, a Thailand-based global conglomerate, and DEG, one of the largest European development finance institutions, will provide the funds.

"The capital increase will be completed by the end of this year and we expect to expand our renminbi business next year," said Askew.

"The new licence will take us a step forward because most of our target clients are Chinese," said Askew.

He expects the bank's portfolio to reach US$200 million by the end of this year and US$500 million by 2008, from US$150 million at the end of last year.

Potential borrowers are Chinese companies typically with a 50-500 million yuan turnover; and more than 90 percent of the bank's lending is to SMEs.

With new business opportunities in sight after the licence is obtained, the bank will seek to expand its geographic coverage and offering of ancillary products.

The market territories of the bank presently include Beijing, Tianjin, Shanghai, and cities in Guangdong, Jiangsu and Zhejiang provinces.

Along with its expansion, BDB also plans to increase its funding sources, said Askew.

The bank is set to secure mid-term funding from the Asian Development Bank and is in talks with International Finance Corporation, a unit of the World Bank, French Development Bank and KFW Banking Group.

"Renminbi funding is something we look to increase as that is where we see our major future business focus. We have talked to city commercial banks, the "big-four" banks, and other medium-sized private banks," Askew said.

BDB was established in Shantou as TMI Bank, the first wholly-owned foreign bank approved by the PBOC. It was transformed into BDB in 2002 with focus on SMEs.

Last year, BDB developed rapidly with the further opening-up of the financial market in China.

At the end of 2004, total assets of the bank had increased by 40 percent and loans outstanding rose by 70 percent compared with the previous year. The bank's net profit soared 170 percent, marking 12 consecutive years of profits.

The results, however, were achieved with no compromise on credit quality as its non-performing loan (NPL) ratio was zero at the end of the year.

The unaudited results for the first quarter of 2005 show a profit almost equal to last year; and targeted annual profit being achieved by the end of June.

(China Daily August 24, 2005)