November 19,2009

ICBC London a Bridge between China's Cash and Major European Borrowers

By CSC staff, Shanghai

American and European banks are finding themselves in hot competition in their traditional strongholds for high-quality corporate clients with Chinese banks that have expanded overseas through equity acquisition or setting up branches in the developed market.


"China's banks have money" is the catchphrase heard among many large companies in Europe and Africa. Recently, such firms are contacting the branch of the Industrial and Commercial Bank of China (ICBC) in London to discuss consortium credits.


As a main lending and book running bank, ICBC's London branch has recently introduced an international syndicated loan into the domestic market for the first time. It will raise a total of recycled syndicated loans of $505 million for its biggest client TRAFIGURA, one of the world's largest raw material commodity traders, based in Switzerland. With a wide network of consortium credits at home, ICBC London successfully held a syndicated loan road show in Shanghai, resulting in over subscription, with 13 major domestic commercial banks participating, including the Agricultural Bank of China, Bank of China, China Construction Bank, and Bank of Communications. ICBC London officials said it is the first time some joint-stock commercial banks had participated in an international syndicated loan road show.


"Europe and American banks are now under attack, and the credit limit of large companies has been reduced, while China's banks lead relatively better life," says Xu Jinlei, general manager of ICBC London. The main reason for TRAFIGURA getting syndicated lending through ICBC London is that financing is more difficult in Europe at present. "It was rare before for a multinational company to raise a foreign currency loan in China."


Increasing their profile in China is another reason why a large international company such as TRAFIGURA would choose a syndicated loan in China. "At present, many companies are negotiating with us, hoping to copy this model," says Xu Jinlei.


The financial crisis has many UK and European financial institutions in a bind, unable to provide large loans sums, and this lending gap is one Chinese banks are eager and willing to fill. Xu Jinlei says the number of ICBC's mainstream UK corporate clients increased significantly after 2007.


According to newly issued monetary and credit data for October by China's central bank, new RMB loans totaled 253 billion yuan, while foreign currency loans grew to 16.3 billion yuan, up 40.04%. The foreign currency loan balance of financial institutions at the end of October totaled $359.6 billion. Although most of the clients for foreign currency loans are domestic companies, it is clear that the real demand for loans to multinational companies is one of the reasons for the increase in foreign currency loans.

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