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Bank of China may enter Pakistan

Publication Date : 06-07-2012

 

Bank of China (BOC), the second Chinese bank after Industrial and Commercial Bank of China Ltd (ICBC), is likely to make entry in Pakistan, said banking sources yesterday.

Entrance of Asian banking giants following exodus of western banks suggest changing dynamics of banking industry in Pakistan, the sources added.

The ICBC has already started operations with one branch each in Karachi and Islamabad. The ICBC is the world’s biggest bank by capitalisation.

The BOC, in which the Chinese Sovereign Wealth Fund holds a substantial stake, is headquartered in Beijing, focusing on corporate and personal banking as well as investment banking.

The expanding bilateral trade between Pakistan and China has attracted Chinese financial market giants, which are already present in many countries including Africa, to mark their presence in Pakistan.

The BOC recently entered Kenya and has operations in other countries including South Africa and Zambia.

The HSBC has recently decided to quit Pakistan and is under process of due diligence. The restructuring of HSBC after continued global financial crisis and failure of banks in United States and now in Europe was considered as the reason for the sale of HSBC Pakistan operations.

The Royal Bank of Scotland was also the victim of financial crisis in Europe. It was one of the largest banks which sold its Pakistan operations.

Pakistani bankers said the entrance of Chinese banks could change the banking trend in Pakistan which largely depends upon government papers for profitability.

Bankers said the two Chinese banks, BOC and ICBC, have enormous skills and energy to explore and grab the potential available in Pakistan, a market of 180 million populations. The leadership of the two countries has been emphasising to increase the volume of bilateral trade which has increased in the last three years, mostly in favour of China.

Pakistan has also signed a currency swap agreement (of US$1 billion) with China to improve bilateral trade and investment.

Banking analysts said the weakening of European banks and Arab economies have also opened space for the Chinese banks to tap the potential. Arab countries have large investment in Pakistani financial market but are not expanding their operations.

They said the initiative of a Turkish bank, Isbank, to enter into Pakistan is also a positive sign for the growth of financial sector. India is also making effort to open banks in Pakistan to increase its trade with Pakistan and Afghanistan.

 

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