BNP Paribas plans small-ticket route into China
Thu Aug 4, 2005
LONDON, Aug 4 (Reuters) - French bank BNP Paribas has no plans to buy a stake in a major Chinese bank but does want to develop its presence in China's financial services sector and will consider taking a small stake in a mid-ranked player.
Baudouin Prot, BNP Paribas chief executive, said on Thursday the bank might look at taking "smaller ticket" 15-20 percent stakes in China's second-tier city and commercial banks, which would mean an investment of around $50 to $100 million.
"We decided not to take a stake in the big Chinese banks. We regard this as too risky," Prot told reporters at a briefing after publication on Wednesday of second-quarter results for BNP, the eurozone's second-largest bank by market value.
A long list of U.S. and European banks are looking to buy or have already bought into Chinese banks to gain a foothold in the potentially lucrative Chinese financial services market.
Royal Bank of Scotland, the UK's second-largest bank, is close to finalising a possible acquisition of a stake in Bank of China, according to one source, although the bank on Wednesday played down speculation about a deal.
HSBC, which has long-standing connections in the region, already owns around a 20 percent stake in China's Bank of Communications and has a similar holding in Ping An Insurance.
Swiss bank UBS is looking to buy a $500 million stake in Bank of China in a transaction that could also include cooperation on investment banking activities.
Other groups, including Goldman Sachs, American Express and Credit Suisse, are seen as potential investors.
CAUTIOUS APPROACH
Prot said BNP Paribas preferred the organic route for expanding corporate and investment banking activities in China.
He said the bank had gained licences to conduct local financing business in Beijing and Shanghai and also had a licence for derivatives operations.
A BNP Paribas unit in Hong Kong -- BNP Paribas Peregrine -- which specialises in advisory work and initial public offerings for mid-cap companies, has a joint venture with a Shanghai-based advisory firm, he said.
Prot said BNP Paribas could potentially be interested in small acquisitions in other emerging market areas, such as the Mediterranean and Gulf regions.
"BNP is not in a position where we have to make significantly large acquisitions to grow, to go to the next stage," he said.
"We can look at opportunities with discipline," he told the briefing. "We are not under pressure to make an acquisition."
The chief executive said big M&A deals were not part of its strategy.
He said the bank's strong first-half results in all its core businesses showed that its focus on organic growth, plus expansion in the U.S. and through medium-sized acquisitions was paying off.
"We do believe that this strategy is proving to be powerful in creating value for shareholders," he said.
In Europe, he saw big cross-border acquisitions in financial services as still problematic, despite recent activity in Italy and Germany.
He said there might be more in the next few years, but pointed to limited harmonisation in European financial services as an obstacle to getting synergies from cross-border deals.
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