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KBC delays China bank expansion amid global financial crisis

(Agencies)
Updated: 2009-01-15 16:15

Belgian financial group KBC said on Thursday that its banking arm has shelved an expansion plan in China that included setting up a locally incorporated bank, due to the global financial crisis and economic uncertainty.

Last May, KBC said it had decided to establish a domestically incorporated China subsidiary to start retail banking operations and expand aggressively in the country.

But that plan has been put on hold, KBC spokeswoman Viviane Huybrecht said.

"While it is true that KBC applied for and obtained a licence giving it the opportunity to geographically expand, it is also true that the implementation of those plans did not start ... The main reason was the turbulent and uncertain economic environment," Huybrecht said in an e-mailed statement.

She added that it would be premature at this point to comment regarding the bank's near- and mid-term plans in China.

KBC said on Dec 29, 2008 that it expected a negative impact of 900 million euros ($1.28 billion) on its fourth-quarter earnings in 2008 as a result of credit portfolio writedowns as the global financial turmoil deepened.

Several other foreign banks hit by the crisis have also scaled back or even scrapped expansion plans in China, the world's fastest growing major economy but confronting a significant slowdown from the heated growth of recent years.

German lender Bayerische Landesbank decided to close its offices in Hong Kong, Beijing and Shanghai, part of plans to cut global staff by one-quarter by 2013, China's Ministry of Commerce said on its website in December.

KBC's banking operation in China currently offers corporate and commercial banking services through three local branches, with a client focus on Belgian companies and Chinese firms seeking to expand business in Europe.

Local incorporation is a prerequisite for foreign banks to offer full-fledged consumer banking services in China. Despite the shelving of the banking expansion, KBC's two-year-old China fund venture, KBC Goldstate Fund Management Co, will go ahead as planned with the launch of a new bond fund as early as this month, the venture's chief investment officer Lode Vermeersch said this week.

KBC Goldstate, 49 percent owned by KBC, has already launched a capital-guaranteed fund and a balanced fund in China.