Rising business ties has Chinese banks eyeing Brazilian counterparts

Song Yang(right), Chinese Consul General in Rio de Janeiro, Zhang Dongxiang (left), president of Bank of China Brazil, and Qu Yang (middle), vice-president of State Grid Brazil Holding, at the launching ceremony of Bank of China's branch in Rio de Janeiro on Aug 29. [Photo by Zhao Yan / Xinhua]

The steadily increasing trade between China and Brazil has attracted more Chinese banks into the Latin American country to complement their international network and provide financial services to clients in both nations.

For example, China Construction Bank Corp's (CCB) 1.6 billion reals ($713.8 million) acquisition of Banco Industrial de Comercial SA marks its first step in entering the Brazilian market. CCB gained 72 percent of BicBanco through the acquisition on Aug 29, which is also the largest overseas merger and acquisition by a Chinese bank in Latin America.

BicBanco will file a plan with Brazilian regulators to buy out minority shareholders and cancel its publicly listed company status shortly. Because of the acquisition, the Sao Paulo-based bank's stock price increased to 8.03 reals on Sept 1 from Aug 29's 7.70 reals, according to BM&F Bovespa, a local stock exchange in Brazil.

Brazil has been an important target market for CCB's international strategy especially with the increasing trade volume between China and Brazil in recent years, according to an official from CCB who preferred to stay anonymous.

CCB is the third Chinese bank entering Brazil after Bank of China and Industrial and Commercial Bank of China. Though Chinese companies are among their priorities, local clients in Brazil are becoming more and more important for these Chinese banks.

Bank of China recently launched a new branch in Rio de Janeiro five years after its first Brazilian branch office was established in Sao Paulo. The bank now has more than 100 branches globally in about 25 countries and regions.

"We hired Brazilian customer managers to develop local clients because our service is not only for Chinese companies but also large Brazilian enterprises which has become a main part of our business in Brazil," said Zhang Dongxiang, president of the Bank of China's Brazil unit.

Zhang said through the cooperation with Brazilian banks, BOC has provided financial service for Vale, Petroleo Brasileiro SA and Brasil Foods SA. "Our global network is among the main advantages for us," he added.

Industrial and Commercial Bank of China (ICBC) entered the Brazilian market in 2011 as preparatory institution and began its official operation in 2013. Through one year's development, it has developed more than 20 local clients. "Brazilian companies welcome Chinese banks and local banks also want to complete the list of their global partners thorough the cooperation with us," said Zhao Guicai, the president of ICBC Brazil.

ICBC remains the world's largest bank with total assets of $3.18 trillion as of last March, according to the 2014 bank ranking from SNL Financial, a financial data provider. It took more than 80 percent stake in Standard Bank of South Africa in Argentina in 2012, marking the first time ICBC entered Latin America.

"ICBC Brazil aims to support Brazilian companies' exports with the joint effort of our entire Group networks across the world," Zhao said.

Such a model has proven to be effective as ICBC Brazil has established cooperation with leading Brazilian exporting companies such as JBS SA, the largest protein processing enterprise, Biosev, one of the top players in local sugar market, and Cooxupe, the largest Brazilian coffee exporter.

"There are many opportunities as well as challenges in Brazil. Chinese banks need to strictly comply with Brazilian laws and regulations and carefully study local markets and clients in order to gain sustainable development," Zhao added.