Long Case Report 2 Bank Of America
Q1. Assess the motivation and consequences of BAC’s minority shareholding investment in CCB.
The motivation and consequences of BAC’s minority shareholding investment in CCB focus on to extend BAC’s business in China’s banking sector. There are several reasons for choosing CCB as shareholding investment.
First of all, it is about a financial condition of CCB. According to the banker magazine in July 2005, CCB ranked 25th among the world’s top 1,000 banks based on tier-one capital. The company’s financial position is certainly bright.
In addition, even though analysts were concerned about the extent of non-performing loans in state-owned banks, among the four largest Chinese banks, CCB was recognized for its profitability as well as for having the lowest non-performing loans.
We could consider the matter from different standpoint. It could think that BAC’s shareholding investment is not only for entry to the Chinese market, but also for making a profit from investment in stocks.
Secondly, CCB was among the market leaders in China in a number of products and services including infrastructure loans, residential mortgages and bank cards. Branch networks were valued assets in the banking industry, which drove BAC to rapidly build such networks in China ahead of the WTO deadline. BAC could have been positioning itself to take advantage of the opening of China’s banking sector to be more competitive.
Thirdly, CCB had established banking relationships with many of the largest business groups and leading companies in industries that were strategically important to China’s economy. Therefore, it is expected that there is a good interaction between BAC and CCB. For instance, BAC would provide its Chinese counterpart with advice on developing credit cards and improving its risk management. And, BAC would proceed with a new joint venture with CCB focusing on credit card business.
Fourthly, the Chinese government encouraged limited foreign investments in banks as a way of
The motivation and consequences of BAC’s minority shareholding investment in CCB focus on to extend BAC’s business in China’s banking sector. There are several reasons for choosing CCB as shareholding investment.
First of all, it is about a financial condition of CCB. According to the banker magazine in July 2005, CCB ranked 25th among the world’s top 1,000 banks based on tier-one capital. The company’s financial position is certainly bright.
In addition, even though analysts were concerned about the extent of non-performing loans in state-owned banks, among the four largest Chinese banks, CCB was recognized for its profitability as well as for having the lowest non-performing loans.
We could consider the matter from different standpoint. It could think that BAC’s shareholding investment is not only for entry to the Chinese market, but also for making a profit from investment in stocks.
Secondly, CCB was among the market leaders in China in a number of products and services including infrastructure loans, residential mortgages and bank cards. Branch networks were valued assets in the banking industry, which drove BAC to rapidly build such networks in China ahead of the WTO deadline. BAC could have been positioning itself to take advantage of the opening of China’s banking sector to be more competitive.
Thirdly, CCB had established banking relationships with many of the largest business groups and leading companies in industries that were strategically important to China’s economy. Therefore, it is expected that there is a good interaction between BAC and CCB. For instance, BAC would provide its Chinese counterpart with advice on developing credit cards and improving its risk management. And, BAC would proceed with a new joint venture with CCB focusing on credit card business.
Fourthly, the Chinese government encouraged limited foreign investments in banks as a way of