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S&P: Big Four banks' balance sheets strong

By Gao Changxin (China Daily)

10:42, November 03, 2012

Large Chinese banks' balance sheets remain strong despite their rapid international expansion in recent years, the credit rating agency Standard & Poor's said on Thursday.

In a report published in Hong Kong, the agency said the banks' global push won't affect their ratings over the next two to three years, though some lenders' profitability might be hurt in the domestic market due to escalating competition.

China's Big Four State-owned banks, Industrial and Commercial Bank of China Ltd, China Construction Bank Corp, Agricultural Bank of China Ltd and Bank of China Ltd, are rated in the top class of ratings by the agency.

Generally, aggressive overseas expansion increases a bank's risk exposure by subjecting it to swings in the overseas market, though it will benefit in the long run.

The agency sees it as "an unlikely scenario" that Chinese banks will be substantially affected by overseas markets.

Part of the reason is that Chinese banks mostly expand through organic growth rather than acquisitions and, despite their fast growth, their overseas assets remains low as a percentage of their total assets, at below 10 percent.

Chinese banks started to venture overseas in recent years, following in the footsteps of other Chinese companies, whose growing overseas operations created huge demand for financial services.

Overseas investment and acquisitions by Chinese companies more than doubled to $380 billion at the end of 2011 from $170 billion at the end of 2008.

Chinese banks currently have 1,148 overseas branches in Asia, Europe, the Middle East and the Americas, up 29 percent from 2010.

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