ANZ joins rush into China

Australia and New Zealand Banking Group hopes to complete the purchase of a 20 per cent stake in China's Shanghai Country Commercial Bank next month, chief executive officer John McFarlane said yesterday.

The board of ANZ Bank would meet in Shanghai late next month, McFarlane said.

"We expect that to be quite important in the context of this transaction," he said.

ANZ has been negotiating to buy into Shanghai Country Bank since 2004.

It bought 20 per cent of China's Tianjin City Commercial Bank in July for US$112 million ($169.3 million).

ANZ joins bigger competitors such as Bank of America and HSBC in buying into Chinese lenders before the nation opens the industry under World Trade Organisation rules at the end of this year.

China's Government wants overseas investors to help its banks improve risk management, and introduce technology and techniques to boost profit and reduce bad loans.

The Commonwealth Bank of Australia, which owns ASB in New Zealand, has agreed to pay A$100 million ($112.7 million) for 19.9 per cent of Hangzhou City Commercial Bank. Commonwealth bought 11 per cent of Jinan City Commercial Bank, China's eighth-biggest city commercial bank, in September 2004.

In Asia, ANZ also owns 10 per cent of Vietnam's Sacombank, 29 per cent of Indonesia's PT Panin Bank and 40 per cent of a credit-card venture with Metropolitan Bank and Trust, the largest Philippine lender.

Last year, it started a bank in Cambodia in a venture with Royal Group. McFarlane said yesterday that Shanghai Country was a larger bank than Tianjin and would therefore probably involve more money.

Shares in ANZ Bank closed up 1Ac to A$27.35 in Sydney yesterday. The stock has gained 14 per cent this year, making it second-best performer among Australia's big four banks.

Shanghai Country said in July it was aiming to increase its pretax earnings by 15 per cent to 420 million yuan ($80.3 million) this year.

Investment Limits Overseas banks are limited to maximum stakes of 20 per cent in Chinese lenders, although McFarlane said the Government had said it might increase that limit.

"Obviously 20 per cent is not what we intend," he said.

"We would like as much as we can get. The Government has said that at some point it will raise the 20 per cent number."

Foreign lenders are betting China's banks will profit from increased borrowing in the fastest growing of the world's 10 biggest economies.

They are also seeking to tap the nation's US$1.9 trillion ($2.87 trillion) of household savings by selling savings plans and credit cards.

Bank of America has invested US$2.5 billion in China Construction Bank. HSBC, Europe's biggest bank, spent US$1.75 billion on 19.9 per cent of Bank of Communications.

Royal Bank of Scotland, Britain's second-biggest lender, bought 10 per cent of the Bank of China for US$3.1 billion.

Shanghai Country and Tianjin City may sell shares in initial public offerings if they become more profitable, McFarlane said."It would be in the interest of the domestic investors in these banks for them to be listed."

- BLOOMBERG