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Foreign lenders eye China opportunities

BEIJING -- Foreign banks saw their profits in China double in 2011 and expect at least 20 percent annual revenue growth over the next three years despite a bleak economic outlook, a survey by PricewaterhouseCoopers said yesterday.

A total of 181 foreign banks in China reported a combined revenue growth from 7.78 billion yuan (US$1.22 billion) in 2010 to 16.73 billion yuan (US$2.62 billion) in 2011, according to the PwC's seventh annual report of foreign banks in China.

The total assets of foreign banks in China also grew 24 percent to 2.15 trillion yuan (US$337.4 billion) over last year, and accounted for about 2 percent of the total assets in China's banking sector. The share is up from a decline during 2008, which was the result of massive liquidity injected into Chinese banks.

Although China's economic outlook was shadowed by a series of weak data recently, annual revenue growth of 20 percent or more until 2015 is still in the sights of the 41 CEOs, senior executives, and branch managers surveyed.

The foreign banks have set their own sights on four target growth areas: financial institutions, multinational corporations, state-owned enterprises and privately owned enterprises. Debt capital market is expected to offer the greatest opportunity.

Facing a talent shortage, many foreign banks are on an aggressive recruitment drive, aiming to increase the industry's headcount by 56 percent to 55,000 by 2015 from the current 35,000.

“The significant growth (in profit) was a result of strong demand for corporate credit from multinationals expanding within China and an increasing number of State and private-owned enterprises customers,” said Jimmy Leung, banking and capital market leader with PwC China.

He added that the internationalization of the renminbi has generated a strong demand and growing revenue in derivatives, which also helped drive results.

The central bank's recent advancement on interest-rate liberalization is also viewed as advantageous, as foreign banks can now compete with more flexibility, Leung said.

“The exponential growth in the number of high net-worth individuals in China is leading some foreign banks to renew and develop their retail and wealth-management businesses,” said Raymond Yung, PwC China financial services leader.

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