implications on asian banks · implications on asian banks ... textile source: company data cdfh...
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This slide is part of a presentation by China Development Financial Holding Corporation and/or its affiliates (together, “CDFH”) and is intended to be viewed as part of that presentation. The presentation has not been updated since it was
originally presented, and does not constitute a commitment by any CDFH entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services.
Paul Yang November 2nd, 2010
The Emergence of China's Banks as Global Players:
Implications on Asian Banks
This slide is part of a presentation by China Development Financial Holding Corporation and/or its affiliates (together, “CDFH”) and is intended to be viewed as part of that presentation. The presentation has not been updated since it was originally presented, and does not constitute a commitment by any CDFH entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services.
2
China banks leapfrog in global banking landscape
Source: The Banker Magazine “Top 1000 World Banks 2010 ”
Banks 2010 Ranking 2009 Ranking 2007 Ranking Tier 1 Capital Total Assets
ICBC 7 8 7 91 1,726
Bank of China 14 11 9 74 1,281
China Construction Bank 15 12 14 72 1,409
Agricultural Bank of China 28 24 65 40 1,026
Bank of Communications 49 49 68 23 485
China CITIC Bank 67 67 160 15 260
China Minsheng Banking Corp 80 107 230 13 209
China Merchants Bank 81 87 101 13 303
Industrial Bank 97 117 260 11 195
SPDB 108 137 191 10 238
� In 2010, 84 banks in Mainland China are ranked top 1,000 banks worldwide, accounting for
9% and 25% of tier 1 capital and pre-tax profits of these 1,000 banks, respectively.
Top 10 banks in Mainland China are ranked in “Top 1000 World Banks 2010 ” in terms of Tier 1 capital, US$bn
This slide is part of a presentation by China Development Financial Holding Corporation and/or its affiliates (together, “CDFH”) and is intended to be viewed as part of that presentation. The presentation has not been updated since it was originally presented, and does not constitute a commitment by any CDFH entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services.
3
China banks outpaced Japanese banks in the past
decade
Source: The Banker Magazine “Top 1000 World Banks ”
Ranking 2010 2006 2001
1 Bank of America Corp (USA) Citigroup (USA) Citigroup (USA)
2 JP Morgan Chase (USA) HSBC Holdings( UK) Bank of America Corp (USA)
3 Citigroup (USA) Bank of America Corp (USA) Mizuho Financial Group (Japan)
4 Royal Bank of Scotland (UK) JP Morgan Chase (USA) JP Morgan Chase (USA)
5 HSBC Holdings( UK) Mitsubishi UFJ (Japan) HSBC Holdings( UK)
6 Well Fargo (USA) Crédit Agricole Group (France) Sumitomo Mitsui (Japan)
7 ICBC (China) Royal Bank of Scotland (UK) Crédit Agricole Group (France)
8 BNP Paribas (France) Sumitomo Mitsui (Japan) Mitsubishi Tokyo (Japan)
9 Santander (Spain) Mizuho Financial Group (Japan) UFJ Holdings (Japan)
10 Barclays Bank (UK) Santander (Spain) ICBC (China)
11 Mitsubishi UFJ (Japan) China Construction Bank (China) Bank of China (China)
12 Lloyds (UK) HBOS (UK) Deutsche Bank (Germany)
13 Crédit Agricole Group (France) UniCredit (Italy) Royal Bank of Scotland (UK)
14 Bank of China (China) Barclays Bank (UK) Bank One Corporate (USA)
15 China Construction Bank (China) AMRO Bank (Netherlands ) BNP Paribas (France)
� Top 15 banks ranked in “Top 1000 World Banks ” in terms of Tier 1 capital
This slide is part of a presentation by China Development Financial Holding Corporation and/or its affiliates (together, “CDFH”) and is intended to be viewed as part of that presentation. The presentation has not been updated since it was originally presented, and does not constitute a commitment by any CDFH entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services.
4
China banks appear to eager to go global now . . .
Source: “China Banker Survey 2009” published by China Banking Association and PricewaterhouseCoopers
The survey of China bankers’ intention to go global, percent of the poll
� Setting up overseas branches & subsidiaries is the most favorable approach for China
bank’s to go global
67
48
3834
Overseas Branches &Subsidiaries
Buy Foreign Companies'Shares
Joint Ventures M&A
Follow their clients
Explore new markets and
business
Develop international
talents, learn financial
innovation and
management skills
Take advantage of US&EU
banks’ deleveraging
Political, diplomatic and
strategic consideration
(e.g. countries with
natural resources)
This slide is part of a presentation by China Development Financial Holding Corporation and/or its affiliates (together, “CDFH”) and is intended to be viewed as part of that presentation. The presentation has not been updated since it was originally presented, and does not constitute a commitment by any CDFH entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services.
5
More than 50% China banks offices located in
Asian countries
� The state-owned banks’ overseas subsidiaries and branches by region, number of outlets,
percent of total
Source: Company data
3 50
90 0
411
0
0
0 0
6
5
5
9
110
7
5
5
911
11
24
26
23
1822
22
5647
68
55 5667
Total BOC ICBC CCB BOCom ABOC
Africa Latin America Oceania North America Europe Asia
89 38 22 11 9 9
This slide is part of a presentation by China Development Financial Holding Corporation and/or its affiliates (together, “CDFH”) and is intended to be viewed as part of that presentation. The presentation has not been updated since it was originally presented, and does not constitute a commitment by any CDFH entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services.
6
M&A activities are also concentrated in Asia,
primarily Hong Kong & Macao
Bank M&A activities
ICBC � Set up ICEA (JV) with Bank of East Asia (BEA) in Hong Kong in 1998
� Acquired a 100% stake in Union Bank of Hong Kong which was renamed as ICBC (Asia)
in 2000
� ICBC (Asia) acquired a 100% stake in Fortis Bank Asia in 2003
� Acquired a 90% stake in Halim Bank (Indonesia) in 2007
� Acquired a 79.93% stake in Seng Heng Bank (Macau) in 2007
� Acquired a 20% stake in the Standard Bank (South Africa) in 2008
� Acquired a 70% stake in BEA Canada in 2009
� Acquired a 97.24% stake in ACL Bank (Thailand ) in 2010
Bank of China � Acquired 30% stakes of Heritage Fund Management (Swiss) in 2008
� Acquired a 100% stake in SALE (Singapore Aircraft Leasing Enterprise) in 2006 and
SALE was renamed as BOC Aviation
China Construction Bank � Acquired a 100% stake in Bank of America (Asia) in 2006
China Merchant Bank � Acquired a 100% stake in Wing Lung Bank in 2009
� China banks’ successful M&A transactions in recent years
This slide is part of a presentation by China Development Financial Holding Corporation and/or its affiliates (together, “CDFH”) and is intended to be viewed as part of that presentation. The presentation has not been updated since it was originally presented, and does not constitute a commitment by any CDFH entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services.
7
Although China banks have increasing presence in
Asia, they are not likely to become truly global
� Primarily serving existing PRC customers. (Japanese banks are actually good proxies)
� Most large Chinese customers are very much still China-focused. Long way from becoming true MNCs.
� RMB is not freely traded. Restricted capital accounts in China.
� Cultural & language barriers.
� Management systems.
� Best opportunities are at home.
This slide is part of a presentation by China Development Financial Holding Corporation and/or its affiliates (together, “CDFH”) and is intended to be viewed as part of that presentation. The presentation has not been updated since it was originally presented, and does not constitute a commitment by any CDFH entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services.
8
We expect “peaceful emergence” of China banks
� China banks are not likely to become competitors in the near-to-medium term for local customers in Asian markets.
� Will most likely to focus on cross-border transactions of existing Chinese customers.
� Potential for Asian banks to form partnerships to address cross-border opportunities.
This slide is part of a presentation by China Development Financial Holding Corporation and/or its affiliates (together, “CDFH”) and is intended to be viewed as part of that presentation. The presentation has not been updated since it was originally presented, and does not constitute a commitment by any CDFH entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services.
9
Taking Taiwan as an example
� China banks are not competitors for Taiwanese customers
1. An already overly-crowded market
2. Lack company specific knowledge for local customers including credit
history, industry knowledge, etc.
3. Much lower margins than opportunities in Mainland
� Bank of China, Bank of Communication and China Merchant Bank have
applied to set up representative offices in Taiwan after cross-strait
Economic Cooperation Framework Agreement (ECFA) took effect in
September 2010
1. Politically driven
2. Following Chinese customers in Taiwan
This slide is part of a presentation by China Development Financial Holding Corporation and/or its affiliates (together, “CDFH”) and is intended to be viewed as part of that presentation. The presentation has not been updated since it was originally presented, and does not constitute a commitment by any CDFH entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services.
10
PrincipalPrincipal
InvestmentsInvestmentsCorporateCorporate
BankingBankingWealth Wealth
ManagementManagementInvestment BankingInvestment Banking
And SecuritiesAnd Securities
Direct Private Equity Investments
Fund andCo-Investments
Mezzanine Finance
Domestic & Overseas Equity Underwriting
Fixed Income underwriting
Capital Markets
Stock Brokerage
Private Client Services
Corporate Loans
Project & Leverage Finance
Corporate Finance and syndication
Venture LendingProject Finance & Development
Case study for forming partnership with China banks
China Development Financial Holding (“CDFH”)
Treasury & TMU
Financial Advisory
Private Placements
Proprietary Trading
Investment Management
This slide is part of a presentation by China Development Financial Holding Corporation and/or its affiliates (together, “CDFH”) and is intended to be viewed as part of that presentation. The presentation has not been updated since it was originally presented, and does not constitute a commitment by any CDFH entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services.
11
Optoelectronics, Biotechnology,
Alternative Energy, Consumer Products
& Services
2000’s
1980’s
1970’s
Petrochemicals
Electronics & Computers
Semiconductor &Communications
1990’s
1960’s
Textile
Source: company data
CDFH has played a vital role in Taiwan’s industrial
development
� We provide financing, investment and capital markets services to key corporate customers
since 1959
This slide is part of a presentation by China Development Financial Holding Corporation and/or its affiliates (together, “CDFH”) and is intended to be viewed as part of that presentation. The presentation has not been updated since it was originally presented, and does not constitute a commitment by any CDFH entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services.
12
� As Taiwan’s largest investment institution, principal investments consists of roughly
US$2.4bn proprietary capital in 360+ companies. Listed/pre-IPO accounts for one
third of portfolio.
� Since 2006, we complemented our direct investment strategy by committing to 27 first
tier private equity funds across Asia, the US and Western Europe. In addition, CDIB
deployed in excess of US$190mn via selected co-investments with best-in-class GPs.
� Principal investment has generated unlevered return on investment (IRR) > 20% over
the past 10 years.
Principal Investment
� CDIB has been well regarded as one of the best project finance banks in Taiwan
since 1992 due to our years of knowledge on industries and valuable resources.
� While most banks’ margins declined in a falling interest rate environment, corporate
banking division still generated an annualized return on equity for over 10%.
� As asset quality continues to improve, the bank’s NPL ratio hits new low at 0.63% in
June 30, 2010.
� As a perennial leader among Taiwanese securities houses and investment banks,
GCSC were consecutively named ”The best domestic investment bank in Taiwan”
and “The best bond house in Taiwan” by several international acclaimed magazines
including The Asset, Finance Asia and Asiamoney.
� GCSC have completed 200+ underwritings over the past 20 years, representing an
overall market share of 15% which ranks us first amongst market players.
Corporate Banking
Securities
Highlights of major business lines
This slide is part of a presentation by China Development Financial Holding Corporation and/or its affiliates (together, “CDFH”) and is intended to be viewed as part of that presentation. The presentation has not been updated since it was originally presented, and does not constitute a commitment by any CDFH entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services.
13
East ChinaEast China
� ≧ 20,000 Taiwanese businesses
� Industry exposure: panel, electronic components, PCB, LED packaging, personal computer system integrators, DSC and etc.
� Portfolio includes: AUO, TPT, Career, Welly Power, Everlight, Lighthouse, SZS, Qisda, Cando, Altek and etc.
South ChinaSouth China
� ≧30,000 Taiwanese businesses� Industry exposure: panel, electronic components,
PCB, LED packing, solder material and etc.
� Portfolio includes: AUO, Simula, Career, Everlight, SZS, Shenmao and etc.
North ChinaNorth China
� ≧ 5,000 Taiwanese businesses� Industry exposure: panel, electronic
components and etc.� Portfolio includes : Chi Cheng, AUO...and etc.
-Beijing -Dalian-Tianjin -Qingdao
-Shanghai-Suzhou -Kunshan- Wuxi
-Guangzhou -Shenzhen-Fuzhou -Xiamen
Most of CDFH’s customers have significant
presence in China
This slide is part of a presentation by China Development Financial Holding Corporation and/or its affiliates (together, “CDFH”) and is intended to be viewed as part of that presentation. The presentation has not been updated since it was originally presented, and does not constitute a commitment by any CDFH entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services.
14
Taiwanese corporations operate through virtual
network along industry supply chain
Components ApplicationPanel System Integrator
CCFL/
Backlight
Welly Power (3080)
Forhouse ( 6120 )
PCB/ FPC
IC Substrate
TMT (5480) TPT (8213)
DYnamic (6251) Career
(6153) Chang Wah (8070)
Hinge SZS (3376)
Other
Components
Taihan (1336)、GPM (5443)、Power Tech (3296)、Alpha Imaging (3538)、Shenmao (3305)
Power Cord
/Connector
Hotron (3092)
Well Shin (3501)
Simula (3511)
Case Chi Cheng (3095)
Panel Maker
AUO (2409)
Innolux (3481)
Hann star (6116)
System
Integrator
ASUS (2357)
Qisda (2352)
Wistron (3231)
Mobile Phone
Notebook
Monitor
LCD TV
Inverter Darfon (8163)
Polarizer Daxon(8215)
This slide is part of a presentation by China Development Financial Holding Corporation and/or its affiliates (together, “CDFH”) and is intended to be viewed as part of that presentation. The presentation has not been updated since it was originally presented, and does not constitute a commitment by any CDFH entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services.
15
Opportunities for partnership
Paid-in Capital (NT$Bln)
6
� Large enough
companies
whereby China
banks are ready
to provide on-
shore financing
� Smaller suppliers
may not qualify
for the China
banks due to lack
of on-shore
credit history or
asset size
Opportunities Opportunities
for partnership for partnership
Daxon
TMTT-MAC TECHVEST PCB CO., LTD.
This slide is part of a presentation by China Development Financial Holding Corporation and/or its affiliates (together, “CDFH”) and is intended to be viewed as part of that presentation. The presentation has not been updated since it was originally presented, and does not constitute a commitment by any CDFH entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services.
16
Opportunities for partnership (cont’d)
Taiwanese SME Taiwanese SME
companies in Chinacompanies in ChinaCDIBCDIBChina banksChina banks
� On-shore RMB financing became
available.
� Reduce overall funding cost
� Customer retention by
extending services to existing
Taiwanese customers in China
� Increase revenues from
segments not otherwise
accessible to China banks
� Offer secured or unsecured
credit guarantees to
Taiwanese companies in China
base on their credit/operating
history in Taiwan
� Make RMB loans to Taiwanese
companies with guarantees by
CDIB
� Lack of asset size
� Little on-shore credit history
� No existing business presence
in China
� No RMB deposits leads to no
RMB lending capacity
� Lack of specific credit
information of Taiwanese
companies
� No or little industry knowledge
IssuesIssues
CollaborationCollaboration
BenefitsBenefits
This slide is part of a presentation by China Development Financial Holding Corporation and/or its affiliates (together, “CDFH”) and is intended to be viewed as part of that presentation. The presentation has not been updated since it was
originally presented, and does not constitute a commitment by any CDFH entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services.
Thank You!