BUENOS AIRES (Dow Jones)–Industrial & Commercial Bank of China Ltd.’s (IDCBY, 1398.HK, 601398.SH) pending acquisition of Standard Bank Argentina will probably have little impact on the South American nation’s small banking industry.
«In general terms it’s positive as long as there isn’t any dilution in the bank’s lending standards» under the new owner, said Sergio Garibian, a director of financial institutions ratings at Standard & Poor’s Ratings Services.
ICBC, as China’s largest commercial bank is known, said last week it had agreed to buy an 80% stake in Standard Bank Argentina for $600 million in its second-biggest international acquisition to date.
The deal, which is subject to regulatory approval, will give ICBC a presence in one of China’s key trading partners. Argentina is the world’s top soymeal and soyoil exporter, and ranks No. 2 in corn exports.
Deutsche Bank, which has hold ratings on the shares of Argentine banks Banco Frances SA (FRAN.BA, BFR) and Banco Macro SA (BMA.BA, BMA), said that ICBC is paying a steep premium for a foothold in Argentina.
«We do not expect a significant change in the competitive landscape in Argentina, as the banks under our coverage have much larger retail franchises and are more focused on consumer lending,» Deutsche Bank analyst Tito Labarta said in a note.
Standard Bank Argentina operated 101 branches that serve both retail and business customers. It ranked No. 11 in the banking system with 10.7 billion pesos ($2.58 billion) in deposits at the end of March, according to central bank data.
At first glance, Argentine banks have plenty of room to grow as loans represented just 15% of gross domestic product in 2009, compared with 72% in Chile and 44% in Brazil, according to Deutsche Bank. But for decades, political and economic instability have conspired against the industry and its potential.
Banks are currently benefiting from a consumer lending spree that is the product of what many say is an overheated economy. The government has forecast economic growth of 8.2% this year, down slightly from a 9.2% expansion in 2010.
Return on equity for the sector was 24.4% last year, while lending to the private sector was up 43.6% on the year at the end of May.
However, a good deal of that growth can be explained by annual inflation that most private sector forecasters say is running above 20%.
So far, most big-ticket investments by China in Argentina have been in oil and minerals, but the Standard Bank deal gives China a presence in the very fabric of the Argentine economy.
Eduardo Oviedo, a professor at Rosario National University who holds a masters of law from Beijing University, said the acquisition complements China’s recent investments in raw materials.
«Entering the financial system without a doubt will allow the Chinese to have a greater presence in Argentina and greater influence over decision making on a national level,» he said in an interview.
-By Ken Parks, Dow Jones Newswires; 54-11-4103-6740, ken.parks@dowjones.com
Source: online.wsj.com