Chinese banks making solid inroads into NZ market
Major Chinese banks operating in New Zealand continued to make significant inroads last year, with a strong rise in overall assets across all three look to cash in on the growing trade ties between the two nations.
Trade between China and New Zealand has tripled to $23 billion since the free trade agreement between the two nations came into force in 2008. The money flow looks set to continue after New Zealand Prime Minister Bill English and China Premier Li Keqiang last week signed off a series of cooperation deals spanning trade, customs, travel and climate change and agreed official talks to upgrade the existing FTA between the nations will start on April 25.
However, while all three banks have primarily targeted corporate clients since setting up shop here, they are also gradually increasing their residential mortgage portfolios, benefiting from a massive housing boom.
China Construction Bank of New Zealand - a fully-owned subsidiary of China Construction Bank Corporation that registered as a New Zealand bank in July 2014 - reported total assets of $887.8 million in the year to Dec. 31, up from $401.9 million in the prior year. It also reported a net profit of $1.8 million, up from a net loss of $4.7 million in the prior year, as net interest income more than doubled and its net operating income more than tripled. The bank significantly increased its residential mortgage portfolio, which jumped to $381.6 million versus $72 million in the prior year. Its corporate loan portfolio was $363.6 million versus $235 million in the year to Dec. 31, 2015.
Bank of China New Zealand, a unit of Bank of China, reported total assets of $514.5 million, up from $208.4 million in the prior 12 months. Its net loss for the 12 months was $1.63 million, narrower than the $6.17 million in the prior period, again on much higher net interest income and operating income. BOC NZ set up shop in November 2014. Corporate loans jumped to $309.4 million from $144.5 million in the prior year. It also turned to the housing market with loans of $33.8 million at the balance date versus none in the prior year.
Finally, Industrial and Commercial Bank of China (NZ), the local unit of the Chinese bank that is the world's biggest lender by assets which registered in November 2013, said assets stood at $903.5 million versus $741.7 million in the prior year. Its net profit stood at $1.15 million versus $2.96 million in the prior 12 months. It also made a stronger foray into the residential market, with its residential loan portfolio increasing to $172.9 million versus $102.4 million in the prior year. Its corporate exposure jumped from $278.6 million to $531.4 million.
The increased profitability and bigger loan books for the Chinese banks came in a year when the overall sector's margins shrank and earnings fell as the big four-Australian owned banks turned to more expensive wholesale funding options overseas to pay for the fastest credit expansion in eight years. Low interest rates have made it harder for lenders to attract people to term deposits.
Two of the Chinese banks leaned more heavily on their parents to fund credit growth, with BOC NZ's total related party liabilities rising to $215.1 million from $88.5 million while boosting customer deposits to $214.2 million from $34.8 million, while China Construction Bank's related party debt rose to $211 million from $109.7 million and its customer deposits rose to $139 million from $97.5 million.
ICBC's funding was more static, with customer deposits rising to $149.8 million as at Dec. 31 from $127.3 million and total related party liabilities at $467.4 million from $461 million at the end of 2015.