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November 11, 2009

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US play: Minsheng pays price

CHINA Minsheng Banking Corp yesterday said it had booked an 824-million-yuan (US$120.69-million) loss on its investment in UCBH Holdings as its initial overseas expansion initiative was severely impacted by the global financial crisis.

Minsheng, China's biggest privately owned bank, paid a combined 887 million yuan for a 9.9-percent stake in San Francisco-based UCBH in 2007 and 2008.

The Beijing-based Minsheng had no overseas network before the deal and was banking on the Chinese community among UCBH's 70 outlets on the east and west coast of the United States to boost business.

However, UCBH's United Commercial Bank became the 120th failed US bank due to the crisis and was seized by regulators and then bought by East West Bancorp.

"The seizure won't have any major impact on Minsheng's operations because the impairment charges have been relatively sufficient," Minsheng said yesterday in a statement to the Shanghai Stock Exchange.

Minsheng, planning a shares sale in Hong Kong, is the latest Chinese financial institution to post a loss after ill-fated overseas expansion moves.

Chinese companies were bold in seeking overseas expansion but their timing was unfortunate.

Ping An Insurance (Group), the nation's second-largest insurer, has been one of the biggest victims of the global financial crisis in China due to its investment in Fortis.

Minsheng shares rose 0.12 percent to 8.12 yuan in Shanghai yesterday, while the benchmark Shanghai Composite Index inched up 0.1 percent to 3,178.

United Commercial Bank China, the locally incorporated outlet, released a statement yesterday that it was running smoothly in China with ample liquidity and capital ratio.

UCB China had net assets of 913 million yuan, it said.

Locally incorporated banks have individual registered capital, which helps the domestic incorporation of overseas banks in China avoid losses from their parent companies and maintain business in China.


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