Over the past decade, Ma Weihua has grown China Merchants Bank Co. into the nations sixth-largest lender in terms of assets by introducing Western products like credit cards and private banking to the vast Chinese market. Now he wants to take on the world.
The financial crisis has left many Western banks bowed and saddled with bad debts, providing a golden opportunity for Chinese banks to expand abroad. And Ma, a former central bank official who joined China Merchants as CEO in 1999, is not hesitating to take the plunge.
China Merchants acquired Hong Kongs Wing Lung Bank last year, its first major overseas deal. The $4.7 billion price was a steep one, and China Merchants had to take an $85 million impairment charge on the bank last year, but Wing Lung returned to profitability in 2009. This year, China Merchants plans to establish a currency trading desk in its New York branch, opened in 2008, and aims to upgrade its London representative office into a branch.
The expansion move is a no-brainer for Ma. Although Chinese companies are ramping up overseas investment, the countrys banks have only 4 percent of their assets in international markets. He realizes China Merchants has a long way to go, and he is anything but triumphant about the way Chinese banks have performed through the crisis. The banks are like a child, he says; they didnt drown in the subprime crisis because they hadnt yet learned to swim in global markets. But in the future we have to learn to swim and be involved in the international market, he explained in a recent address to students at New York Universitys Stern School of Business.
However quickly the bank expands abroad, though, the big domestic market will remain the main engine of growth for China Merchants. The banks pioneering credit card operation has nearly one third of the Chinese market. Ma says his best decision as CEO was to turn down an offer some years ago from thenCitigroup CEO Sanford Weill to establish a credit card joint venture in China. With 50 percent no one would put their entire energy into it, he says.
The banks All-in-One credit card has become a status symbol that is helping China Merchants go upmarket. To build its customer base, the bank targets university graduates, who are proving just as eager to buy on credit as their American and European counterparts. Roughly 40 percent of the banks credit card profits come from overdraft fees. Who overdraws? asks Ma. Its the young people, the wealthy people. The same as in the Western world.
That formula hasnt worked so well for Western banks lately. If Ma can turn credit card debt into consistent profits, he will really have something to teach his rivals.
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