China Construction Bank (CCB), the mainland's third-largest lender, is reported to be interested in acquiring Bank of America (Asia), the Asian arm of the world's second-largest lender.

 

Local Chinese-language newspaper Sing Tao Daily yesterday quoted market sources as saying that CCB is planning to purchase Bank of America (Asia), but has yet to make an offer.

 

It would be CCB's second attempt to buy an overseas bank. In February, CCB failed to buy Asia Commercial Bank in Hong Kong.

 

But both banks remained tight-lipped about yesterday's report.

 

Analysts said the deal appears to be on the cards, based on the two banks' strategic relationship and the mainland lender's eagerness to expand overseas.

 

"If the acquisition is the case, it could help CCB consolidate overseas businesses and enhance its status," said Casor Pang, a strategist at Sun Hung Kai Financial Group.

 

He added that the acquisition may help boost CCB's image as an international player.

 

But he refused to speculate on the value of the acquisition, because "we don't know which sector and the proportion of stakes CCB is interested in."

 

Bank of America (Asia) currently operates 16 branches in Hong Kong and Macao.

 

Such a deal would also strengthen CCB's consumer lending business, which is currently the bank's Achilles heel.

 

"CCB is not very experienced in consumer lending, so retail and private banking will be its future priorities," said Pang.

 

However, retail banking is the forte of Bank of America (Asia).

 

The bank offers a wide range of services and products, including deposit and loan products, trade finance, foreign exchange, factoring, leasing, insurance, investment and electronic services.

 

It posted a net profit of HK$537 million after tax in 2005, an increase of 20 percent year-on-year.

 

However, Pang said that synergy resulting from the deal would be very limited. "The size of business of Bank of America (Asia) is small compared to CCB, and will only boast CCB earnings by a small extent."

 

CCB's latest attempt to expand into overseas markets will encourage other mainland lenders to do likewise, according to industry analysts.

 

They said Hong Kong would offer other mainland banks a good platform to go global.

 

(China Daily August 10, 2006)