Economy

Markets

Industries

Insights

Reports

Events

More banks interested in trust firms

By Ding Qi (chinadaily.com.cn)
Updated: 2008-09-05 17:48

Commercial banks in China are involved in an acquisition race for trust companies to prepare themselves for future competition, and many succeeded getting what they wanted after long talks, the Shanghai Securities News reported on Friday.

Acquiring a trust business certificate from trust companies will enable the banks with more profitable options once the policy restriction eases, according to banking insiders.

Currently, commercial banks in China are restricted from many other financial services such as brokerage and trust investment to prevent financial risks, but the limitation is expected to relax in the future amid a financial innovation trend.

However, some financial institutions are still in negotiations to acquire trust companies.

A source told the newspaper that Bank of China (BOC), the country’s third-largest lender, had been talking with Hunan Trust and Investment Co on a share purchase deal, but there is no major progress yet.

Zeng Shimin, deputy director of Hunan Trust, confirmed that talks with BOC have been going on for three months, but it's too early to disclose any details. He also denied market rumors that the government of Hunan province may quash the deal due to regional interests.

Meanwhile, Fujian-based Industrial Bank is also seeking to buy into Gansu Trust and Investment Co, according to a source close to the talks.

A senior manager of Industrial Bank told the paper that currently, the lender has a choice among several trust companies, and relevant talks are under way, but there is no timetable for a deal.

In June 2007, Bank of Communications (BoCom) acquired Hubei International Trust and Investment Co and reorganized it into BoCom Trust, making it the first successful case of its kind. Since then, an increasing number of commercial banks have sought to extend their impact into trust, mutual fund investment, insurance, and financial leasing.

Besides BoCom, Minsheng Banking Corp, and China Construction Bank also managed to buy into Shaanxi International Trust and Investment Co and Xingtai Trust Co. In addition, Industrial and Commercial Bank of China, China Merchants Bank, and Shanghai Pudong Development Bank are all contacting trust companies across the country for possible acquisitions, the newspaper said.

However, experts noted that most bank-trust cooperations so far remain limited to share-based deals. The substantial mergers in business are yet to spread pending regulations and the nation’s future positioning in the trust investment sector.