until recently, the Industrial and Commercial Bank of China (ICBC) could be easily mistaken in Hong Kong for another bank with the same initials, the International Commercial Bank of China, from Taiwan. ICBC is the biggest bank in China but had only two branches in Hong Kong.

Three years ago, ICBC decided it was time to raise its profile in the city, given the growing status of Chinese banks overseas. A latecomer to Hong Kong’s saturated market, it can only grow fast by acquiring other local banks. This it did in 2000, when it bought locally listed Union Bank for US$1.8bn and renamed it ICBC (Asia). In mid-July 2001, the parent injected its Hong Kong-based commercial business to the listed vehicle.

In another high-profile acquisition in late August this year, ICBC (Asia) agreed to purchase the Hong Kong retail operations of Belgium-based Fortis Bank for an estimated $2.5bn. This increased ICBC (Asia)’s branches from 20 to 42 and its assets grew to HK$90bn ($11.6bn) from HK$62bn.

ICBC (Asia) is moving up the league but still has a long way to go to match its rival, the Bank of China (BoC). While BoC trails ICBC on the mainland, it is the second largest bank in Hong Kong, with HK$820bn of assets.

ICBC’s ambitions are clear: “Our long-term goal is to be a major bank in Hong Kong. The (latest) acquisition will strengthen our retail and banking business,” said Zhu Qi, chief executive of ICBC (Asia).

ICBC (Asia)’s strength is in wholesale banking, from which it derived most of its profits. It is Hong Kong’s third-largest syndicated loan arranger, thanks to strong links with the mainland and other China-related firms. In July 2002, for example, it was one of seven banks arranging a $700m loan for China Unicom, China’s second-largest telecom companies.

ICBC (Asia) wants to expand its retail business, going after not only local customers but the fast-growing number of mainlanders visiting Hong Kong as well. It plans to issue in Hong Kong its popular Peony credit card, 80 million of which have already been issued on the mainland.

ICBC also plans to inject more assets into the Hong Kong firm and may use it as a shell for listing the parent by the oft-quoted deadline of 2006. But first ICBC (Asia) has to learn to survive in this tough market, where interest margins and lending have been shrinking since 2000. In the first half of 2003, even long-established BoC suffered from a year-on-year decline in profits of 11.8%, to HK$3bn, due to lower interest income and a re-evaluation of its property investments.

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