The Global Journey for Chinese Banks

The Global Journey for Chinese Banks Wei Sun, Ph.D. Chicago Booth [email_address]

Executive Summary ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Hunger for Growth ,[object Object],Source: China Statistical Yearbook2008; WS analysis

The Journey: Great Leap ,[object Object],[object Object],Source: “Venturing Broad”, Boston Consulting Group; WS analysis

Global Expansion: Three Birds with One Stone ,[object Object],[object Object],Capital Management Benefits Process Costs

Can You Grow? ,[object Object],[object Object],Source: McKinsey Global Institute; WS analysis Log scale

[object Object],Can You Grow Globally? ,[object Object],Source: “Venturing Abroad”, Boston Consulting Group Developed Economies Hold More Foreign Banking Assets

What Is The Cost? ,[object Object],[object Object],[object Object],[object Object],Source: B. Greenwald & J. Kahn, “Globalization”; WS analysis Funding Sources for Investment in Fixed Assets in China 19.6 20.3 15.3 65.4 68.2 77.4 0 20 40 60 80 100 1990 2000 2007 Foreign Investment State Budget Self-raising Funds and Other Investments Domestic Loans % Funding Sources for Investment in Fixed Assets in China 19.6 20.3 15.3 65.4 68.2 77.4 0 20 40 60 80 100 1990 2000 2007 Foreign Investment State Budget Self-raising Funds and Other Investments Domestic Loans % Source: China Statistical Yearbook2008; WS analysis Ratios of ROA (foreign/home) 2004-2006 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 Home Europe North America Barclay's (UK) HSBC (Hong Kong) Deutsche Bank (Germany) North America Europe Home Ratios of ROA (foreign/home) 2004-2006 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 Home Europe North America Barclay's (UK) HSBC (Hong Kong) Deutsche Bank (Germany) North America Europe Home

An Efficient Market? ,[object Object],[object Object],Source: “Venturing Abroad”, Boston Consulting Group ,[object Object],[object Object]

Deal or No Deal: Ping An and Fortis ,[object Object],[object Object],[object Object],[object Object],EUR 2.15 Billion (~$ 3 Billion) Source: Fortis Ping An investor presentation ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

More from Ping An and Fortis Deal ,[object Object],[object Object],[object Object],[object Object]

Lessons Learned from Ping An-Fortis ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

The Global Journey: Start with a Clear Mind In general, Chinese banks are facing: ,[object Object],[object Object],[object Object],[object Object],[object Object],Growth ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Diversification ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Capability Gap Strengths Goal Current

The Global Journey: One Step at a Time A particular Chinese bank can take a progressive globalization strategy: (Now) Due Diligence & clarify goals (Near Term) Follow customers: foreign branches, subsidiaries, JV, M&A, and clusters. (Mid Term) Increase foreign assets: M&A, organic growth, mixed growth (Long Term) Achieve sustainability: global integration, efficiency, and innovation Steps Customer Market Capability Goal Setting Learn Diversify Grow Needs Fits Base + Products Risk + Opportunities Economies of Scope Economies of Scale

Thank you for your attention! Wei Sun, Ph.D. Chicago Booth [email_address]

The Global Journey for Chinese Banks

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