The mainland is and will continue to be a key profit driver for listed banks at home and abroad, as robust economic growth boosts domestic banks' results and foreign lenders compete for market share, according to a KPMG report.

 

But mainland banks and their newly arrived foreign counterparts will become rivals as well as cooperative partners, said KPMG, one of the largest professional services firms in the world.

 

"There is strong competition between mainland banks and newly arrived foreign banks, but mainland banks will have the advantage in terms of customers because they have already won their trust over the decades," said Walkman Lee, a partner at KPMG's financial services division in Hong Kong.

 

"People are more likely to entrust their money to someone they know rather than someone they don't," Lee added.

 

But they are also ideal working partners, as foreign lenders bring advanced banking management know-how and mainland banks offer vast networks throughout the country, said Babak Nikzad, another partner at KPMG's financial services division in Hong Kong.

 

Foreign banks "provide great incentives for Chinese banks, as Chinese banks are still lagging behind their overseas peers in areas like financial products", said Nikzad.

 

But he said that "Chinese banks shouldn't be worried at all because they have built up a massive network in the country, their footprint is very hard for newcomers to beat".

 

KPMG also released the 2006 financial results for Hong Kong-listed banks, with all 18 lenders posting another year of good results.

 

Four of the five Hong Kong-listed mainland banks saw double-digit leaps in profit last year, with increases in both net interest and non-interest earnings.

 

Listed banks continued to expand their balance sheets by over 17 percent, and their loan books by 6 percent, on the previous year. The strongest growth was achieved in loans for use outside Hong Kong and in unsecured personal credit including credit cards, KPMG said in its report.

 

More listed banks see the mainland as their key development destination, according to KPMG. "They have adopted dual strategies on the mainland to grow both organically and also through equity investments in a mainland commercial bank," the report said.

 

"In order to benefit from full liberalization of the mainland market, seven listed banks have either applied for or obtained approval to incorporate locally on the mainland."

 

HSBC, Standard Chartered Bank and Bank of East Asia were the first three Hong Kong-listed banks to get the nod from the banking authorities.

 

(China Daily April 20, 2007)