Overall: Best Chinese bank for BRI 2017
Bank of China
Judged on purely local terms, Bank of China falls behind some of its domestic rivals: Industrial and Commercial Bank of China and China Construction Bank both bring in far more in terms of net interest income, while Agricultural Bank of China’s branch network – 23,682 at the end of 2016 – is more than twice the size of Bank of China’s. But look abroad and you see a vastly different story.
Bank of China’s renminbi clearing bank network is a plain example of how it leads the competition overseas. It was perhaps natural that it should have been picked to manage renminbi clearing in Hong Kong and Macau, setting up in 2003 and 2004 respectively. But even when Chinese banks began to fight hard over the right to clear the currency overseas, Bank of China maintained its leadership.
Out of the 23 offshore renminbi clearing bank licenses China has granted throughout the world, Bank of China runs 11. ICBC, its closest rival in this regard, manages seven, China Construction Bank has three, and Agricultural Bank of China and Bank of Communications have just one each. This is an important distinction. As one executive at a foreign bank puts it, “from a Chinese perspective, renminbi and Belt and Road are joined at the hip”.
Bank of China has also led the way as an issuer. In 2015, it sold an eye-catching 10-tranche deal that included bonds denominated in dollars, euros, Singapore dollars and offshore renminbi, the latter being split between dim sum and formosa tranches. In April, it raised $3.1 billion from another multi-currency transaction, this time adding Australian dollars to the mix.
Spurring a boom
Bank of China has taken a strong position when it comes to M&A financing, helping spur a boom in Chinese outbound M&A that hit a record $225.4 billion last year, more than double the amount in 2015, according to Dealogic data. Across almost every market, whether as a borrower or a lender, a buyer or a seller, Bank of China, with Chen Siqing at the helm, all but defines Belt and Road.
Even the bank’s asset disposals have the hint of the Silk Road. When Bank of China sold Nanyang Commercial Bank, a Hong Kong lender, in December 2015 it said the money raised would be used to fund an expansion in southeast Asia, helping it “capitalize on renminbi internationalization and the One Belt, One Road initiative”.
Bank of China claims to have supported 420 Belt and Road projects, lending more than $30.7 billion to Belt and Road countries in 2016 alone. It has also made efforts to help those companies better hedge their currency risks as they move along the Belt and Road, kicking off trading in currencies including the Czech koruna and the Mongolian tughrik.
This is admirable, and shows that Bank of China is not resting on its laurels. But the bank stands out as the leader among Chinese banks covering Belt and Road, not because of a few prominent recent initiatives. Instead, it is the decades of overseas expansion that have put Bank of China in a position to win this award.
Bank of China’s rivals are sure to work even harder to win this award next year, but one thing is clear: it will be tough going.