A Research About Overseas Mergers And Acquisition’s Contribution To The Internationalization Of China Commercial Banks

In the economic globalization, financial liberalization as well as the technical progress of financial development condition, overseas merger and acquisition frequency of the commercial banks becomes higher and higher. As representatives of commercial banks in China, Industrial and Commercial Bank of China(ICBC), Bank of China(BOC) and China Construction Bank(CCB) has started the overseas M&A very early, and took the overseas M&A as an important means of its international expansion, as well as the important component of its international strategy which is hoping for their internationalization promotion through this means, and looking forward to becoming the international large-scale commercial banks. This paper argues that the internationalization is the inevitable trend in the future development of commercial banks. The overseas M&A as one of the important means to achieve a commercial bank’s internationalization, global business expansion and to enhance the core competitiveness, has outstanding advantages in the rapidly expanding scale, occupying the international market, realizing the regional advantage complementary and international operation. Therefore, this paper has choose ICBC, BOC and CCB as the objects of the case study, exploring the overseas M&A’s contribution to the internationalization of commercial banks has important theoretical and practical significance, and the study results will have proactive guidance value.First of all, this article will base on the internationalization content and motivation theory of commercial banks, and both on the commercial banks overseas M&A motivation and performance theory, combined with the three banks in its annual report on internationalization and overseas M&A of related content, respectively analyzing the internationalization motivation of three banks overseas M&A.Secondly, in order to make a preliminary evaluation of overseas M&A contribution to the internationalization of three banks, this article respectively uses historical comparative analysis to analyze historical data of three banks, from four aspects of PB, financial indicators, the international regional structure as well as the overseas institutions staff numbers to discuss the variation of these indexes before and after overseas M&A of the three banks, and using the commercial bank internationalization index:IBT to measure the degree of internationalization of three banks before and after the implementation of overseas M&A. Through the analysis of the indicators, this paper has found the preliminary evaluation of the overseas M&A contribution to the three banks internationalization. Analysis shows that in terms of PB, overseas M&A for capital markets will be more bullish for the future development of three banks, therefore in the process of implementation of overseas M&A, three banks all have good performance. In terms of financial indicators, whether it’s profit ability, growth ability, or the level of risk and risk resistance, overseas M&A are contributing to ascension of these indicators. From the point of profitability, ICBC’s total assets increased 162.08%, net profit of 467.10%; BOC’s total assets increased 186.40%, net profit of 322.99%; CCB’s total assets increased 207.32%, net profit of 392.77%. It also focuses on the three banks M&A companys of the group’s overall contribution to total assets and profit before tax, the results show that the acquired company for three banks profitability of ascension as well as the expansion of assets have larger contribution, especially the three banks in Chinese Hong Kong business entity ICBC Asia, BOC Asia and CCB Asia have the biggest contribution. From growth ability, level of risk and risk resistance, through the overseas M&A, three banks have better growth, lower levels of risk and higher ability to resist risks. Thus, the various financial indexes of three banks have increased. In terms of international regional structure, by the end of 2014, ICBC has more than 338 overseas institutions, covering 41 countries and regions, just comparing with its listed in 2006 had 98 overseas institutions, covering 11 countries and regions, it does really significantly increased; BOC now has 628 overseas institutions, the same as the ICBC also covering 41 countries and regions; CCB now has 114 overseas institutions, covering 20 countries and regions, compared to its listed in 2007 also had a certain degree of increase. Thus, overseas M&A made the international expansion of three banks increasingly accelerate, steadily moving the international network layout. In terms of staff number of overseas institutions, ICBC and CCB’s overseas institutions staffs have increase steadily year after year; BOC’s overseas institutions staff number fluctuated, but its overall quantity are far more than ICBC and CCB. Eventually through calculating commercial bank internationalization index:IBT, we can find that through overseas M&A, ICBC and CCB having realized the increase of the degree of internationalization, BOC always maintaining at a high level. Compared to their first listed, the degree of internationalization of ICBC increased 2.18%, CCB increased 1.36%, and BOC is always fluctuates around 15%.And then through further comparative analysis of these three banks, making a comprehensive evaluation of overseas M&A’s contribution to their internationalization, and summarizing the similarities and differences in the process of these three banks overseas M&A, as well as the successful experience and lessons of failure. It’s helpful to China’s commercial banks’overseas M&A, the expansion of overseas markets, implementing the globalization strategy, optimizing the allocation of the world’s resources, and the improvement of their competitiveness. It will also make up the existing research results only from the aspects of M&A performance to study overseas M&A impact on commercial banks, rising the overseas M&A to the internationalization level of commercial banks, but not limiting to the simple study of the behaviors or the mergers.This paper used the lateral comparison analysis method, from PB, financial indicators, regional structure, the staff number of overseas institutions and international commercial bank internationalization index:IBT five aspects to analyze. From the point of PB, the PB level of ICBC and CCB is higher than BOC; from the point of financial indicators, ICBC’s increase is higher than that of CCB and BOC; from the point of international regional structure, the expansion effect of ICBC is most obvious, by the end of the year 2014, it has been covering the same number of countries and regions as BOC; from overseas institutions staff number, the staff number of ICBC and CCB has increased significantly, and the BOC is always maintained at a higher level; from the degree of internationalization, ICBC improved the most, CCB improved a little, and improve BOC is always in high levels of volatility. Thus, overseas M&A contribution to to the internationalization of three banks is positive, but there are still exist differences. And such differences are affected by the frequency and the amount of overseas M&A, international foundation and strength, type of the object being mergers, overseas M&A regions, and many other factors. Although the differences exists, it also has many similarities, such as:the time of the three banks began to overseas M&A are also early, M&A targets are more for the banking sector, as the starting point of overseas M&A are in Chinese Hong Kong and Chinese Macao region, through the overseas M&A causing a huge rise in number of overseas institutions, etc.On three banks overseas M&A summarizes successful experiences and failure lessons can be found that, in terms of successful experience, through the acquisition of a controlling stake, can indirectly cover many countries and regions, making the degree of international regional structure to get the fastest expanding, and also can obtain the group’s overall the massive increase in total assets and profit before tax, such as:ICBC to 20% controlling stake in South Africa’s Standard Bank acquisition; through the acquisition and integration in the companys of Chinese Hong Kong and Chinese Macao regions, can establish the group’s largest overseas business entity, such as:ICBC Asia, BOC Asia and CCB Asia; through cross-border M&A can improve the diversity of the group’s overall level and profitability, such as:the acquisition of BOC to Singapore Aircraft Leasing Company; through the acquisition of the same industry can get the maximum synergistic effect, such as:CCB purchased America International Credit (HK) co., LTD.,,making CCB obtain a complete high-quality platform for the credit card business. In terms of failures, ICBC and BOC all have acquisition failures, summing up there are two main reasons:one is the restraint of the host country（region） laws, regulations and restrictions, making was forced to suspend the acquisition, such as:ICBC purchased the 20% controlling stake of Chinese Taiwan Bank Sinopac, BOC purchased France Shiloh Bank; secondly, the target is not clear, leading to the acquisition of overlap, reduceing the operating efficiency, affecting the group’s overall development, such as:BOC transfered Nanyang Commercial Bank.That is to say, in the process of commercial banks overseas M&A, the commercial banks need to base on the whole development strategy of the commercial banks, further considering whether the acquired companies will play a real role in the development of the banks. And whether after the acquisition will cause a waste of resources, the target companies will be hindered the development by the policy, the target companies can bring resources advantages for the banks, and is conducive to the further diversified development of the banks or not.Not simply in order to improve the degree of internationalization and then to carry out the overseas M&A blindly. Therefore, setting clear international development strategy, paying attention to the selection of the international areas, understanding the host country（region）’s laws and regulations thoroughly, setting up the international development teams, and constantly enhancing their own development, are plays an important role in realization of the internationalization of commercial banks.