Santander, the eurozone’s biggest bank, is planning a Chinese joint venture with China Construction Bank in a cautious first step towards filling the Asian gap in its global retail network.
The Spanish bank declined to comment on Wednesday, but banking sources in Spain and China said the venture – yet to be formally signed by the two sides or approved by the Chinese authorities – would focus on rural banking and automobile finance.
The official China Daily newspaper, which broke the news, said a joint financial holding company was likely to be established with initial capital of Rmb3bn ($439m), rising to Rmb5bn in three years.
CCB would hold a 60 per cent stake and Santander the rest in a venture whose operations would include opening 100 village banks.
It was all but inevitable that Santander – after acquisitions in the UK, the Americas and continental Europe – would invest in China, although the bank’s top executives insist they have no plans for large deals in Asia.
Alfredo Sáenz, Santander chief executive, said in October :“A big jump from Spain to China or Thailand or Hong Kong or Singapore is, as they say in the circus, a triple death jump without a safety net.”
BBVA, Spain’s second-biggest bank, spent a further €1bn ($1.45bn) in December to increase its stake in China Citic Bank to 15 per cent. The two banks also have an car financing venture in which BBVA holds 35 per cent.
Criteria CaixaCorp, the listed investment arm of La Caixa, the Barcelona-based savings and loan institution, agreed two weeks ago to pay €331m to boost its stake in Bank of East Asia to nearly 15 per cent from 9.81 per cent. BEA is based in Hong Kong but has a strong retail branch pre- sence in mainland China.
Unlike some of their western rivals, the larger Spanish banks have survived the financial crisis in relatively good health and are eager to expand outside Spain following the collapse of the housing bubble there.
It is not clear how profitable Chinese rural banking will be, but in recent years Beijing has encouraged domestic and foreign banks to extend services into the vast hinterland where millions of citizens have no access to financial services.
At the prompting of the government, Chinese banks such as CCB, Agricultural Bank of China and Industrial and Commercial Bank of China have begun to reverse their previous policy of closing thousands of branches in remote and unprofitable locations.
Among foreign banks so far, HSBC, Standard Chartered and Citibank have all answered the call to establish rural operations but expansion has been slow and some analysts suggest these banks have opened rural branches partly to please Beijing. The Chinese government wants rural citizens to be served by large commercial banks rather than by hundreds of poorly-managed and undercapitalised rural credit co-operatives that currently act as local banks.
