(Yicai Global) April 3 — The recent European and US banking crisis will not affect Bank of Communications’ internationalization strategy, according to an executive at the Chinese lender.
“The impact of these events on us is very small, as they will not affect our internationalization process,” Tu Hong, general manager of the financial institution department of Bank of Communications, told Yicai Global.
Bank of Communications has 23 overseas branches in 18 countries and regions. As of the end of last year, they achieved total assets of CNY1.3 trillion (USD190 billion), up 6.4 percent from a year earlier and accounting for 9.7 percent of the total. The overseas branches made up 5.6 percent of the Shanghai-based bank’s total net profit.
“Silicon Valley Bank and Signature Bank experienced risks mainly because of serious mismatch between assets’ maturity and liabilities,” said Tu, who is also the president of Bank of Communications’ Shanghai branch. “Their customers are too concentrated on high-tech companies, and their main business shifted from loans to securities financing, causing risks due to the deviation from the main engagement.”
But as the overall US banking sector is healthier than in 2008 thanks to improved capital adequacy ratio and leverage ratio, there are no systemic risks in the US financial system, Tu noted.
“Credit Suisse has some business with Chinese banks, but just a few,” Tu said, adding that “Bank of Communications does not hold any additional tier one bonds that have been written down, so the overall judgment is that the risk events of European and US banks pose very little threats to Chinese banks.”
Tu believes that the fall of Credit Suisse is mainly because of poor management and the facts that its business development is out of the main focus and that it directed to many resources to investment banking, which, once it reported huge losses, caused damages to the lender’s balance sheet.
Moreover, Credit Suisse’s risk management is out of control, and internal management is chaotic, Tu said, noting that this should also serve as a wake-up call for Chinese banks.
Bank of Communications achieved a net profit of CNY92.1 billion (USD13.4 billion) in 2022, up 5.2 percent from a year earlier, according to its latest earnings report.
Editor: Futura Costaglione
