Industrial & Commercial Bank of China Ltd., the world’s largest lender by assets, signed up the USD109 billion Indian conglomerate Tata Group as a client as part of its overseas push to counter a slowdown at home.
ICBC will be a “strategic banking partner” to Tata that has over 100 operating companies and will provide services ranging from global cash management, consulting, international trade finance to investment banking, foreign exchange and derivatives trading, according to an e-mailed statement from Tata Sons Ltd. The lender will also set up a team to support Tata’s growth plans in countries including China, Singapore, the U.S. and Europe.
The lender with more than $3.5 trillion in assets is looking at overseas markets as the weakening Chinese economy threatens its asset quality and profitability. ICBC, which generates about 94 percent revenue from its domestic operations, more than doubled provisions for bad loans last quarter from a year earlier amid near-zero growth in profit.
It is ramping up its Indian presence as the third-largest Asian economy expanded at a world-beating 7.4 percent pace in the three months, compared with China’s 6.9 percent.
“This shows ICBC’s ambitions to grow their franchise as a global player,” said Singapore-based Gaurav Arora, head of corporate and institutional banking for India at Greenwich Associates. “This also suggests a fundamental shift in strategy to serve more non-Chinese mega conglomerates.”
With many U.S. and European banks turning more selective in the Asian market, large regional banks such as ICBC are stepping in to fund the expansion plans of big business groups, Arora said.
The Chinese lender is expanding in the South Asian country at a time local banks are struggling to clean up their balance sheets amid the slowest pace of loan growth in 20 years. Publicly-owned Indian banks need to raise $28 billion of equity by 2019 to meet stricter regulations and 11.1 percent of the nation’s loans are classed as stressed assets.
As part of Chairman Cyrus Mistry’s Vision 2025, the Tata Group aims to be among the top 25 globally by market value within 10 years and targets to get its products and services to a quarter of the world’s population. In 2014, Mistry earmarked $35 billion to carry out this plan, with a special focus on building group’s retail, infrastructure, finance, defense and aerospace businesses. The group has a total debt of $37.5 billion.
Trade between China and India has been booming. Investment by Chinese companies in the Indian market will continue to increase, according to an e-mailed response from ICBC. “That provides great cooperation opportunities for Tata and ICBC,” it said. Tata didn’t immediately elaborate on the partnership beyond its statement. Bhuma Shrivastava and Anto Antony, Bloomberg
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