Approval For Commonwealth Bank’s Strategic Co-Operation In China
19 November 2004
The Commonwealth Bank of Australia today advised that its strategic co-operation agreement with Jinan City Commercial Bank (‘JNCCB’) has been approved by the China Banking Regulatory Commission (‘CBRC’). The Commonwealth Bank will purchase an initial 11% shareholding in JNCCB, with Board representation, and will also be granted options over additional equity up to 20% - the maximum allowable by regulation for a single foreign player.
The Commonwealth Bank will provide JNCCB with technical assistance in key areas through a structured capability transfer program. Enhancing JNCCB’s skills in these areas will enable it to offer highly competitive services and to continue to grow profitably.
Jinan City Commercial Bank is one of the 10 largest city commercial banks (‘CCBs’) in China by assets and is located in the capital city of Shandong Province on China’s eastern seaboard, south-east of Beijing. Jinan is the leading CCB in Shandong Province; one of the fastest growing provinces in China with a population of almost 90 million people.
The Commonwealth Bank looks forward to a long and mutually rewarding partnership with JNCCB.
An English translation of the Chinese press release issued by JNCCB yesterday can be viewed on the Commonwealth Bank’s media release website.
The Commonwealth Bank is one of Australia’s leading providers of integrated financial services which include retail, business and institutional banking, funds management, superannuation, insurance, investment and broking services. The Bank has the largest customer base of any Australian Bank with leading domestic market shares in home loans, personal loans, retail deposits and discount stockbroking, and is Australia’s largest issuer of credit cards. It is the country’s largest manager of Australian funds, and the largest retail funds manager by total value of funds under management. The Bank is the largest manager of retail superannuation, allocated pensions and annuities by fund under management in Australia. It is one of the largest listed companies on the Australian Stock Exchange and is included in the Morgan Stanley Capital Global Index.
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Copy of Jinan City Commercial Bank Statement
The Strategic Cooperation between Jinan City Commercial Bank and Commonwealth Bank of Australia has Received Formal Approval from China Banking Regulatory Commission
The strategic cooperation between Jinan City Commercial Bank (JNCCB) and Commonwealth Bank of Australia (CBA) has received formal approval from China Banking Regulatory Commission on November 4, 2004. This is the first foreign cooperative undertaking by a financial organization in Shandong Province.
Objectives and Principles of the Cooperation
Established in 1996, JNCCB is the first stock commercial bank in Shandong Provinces. Since its establishment, the bank has promoted comprehensive developments of various business operations through management system reforms, business organization enhancement, and business product renovation. As of October 31, 2004, the bank’s total assets has reached RMB22.8 billion, a 685% increase compared to its initial value at the time of its establishment; cash in bank balance has reached RMB15.56 billion, an increase of 602% compared to its initial figure; loan balance has reached RMB15.88 billion, an increase of 868% compared to its initial figure; accumulated interest tax has reached RMB863 million; and its capital has grown to RMB1 billion from an initial amount of RMB250 million at the time of establishment. The bank has been ranked no. 1 among commercial city banks in Shandong based on various business indices. On December 24, 2003, when the "Financial Times" published for the first time the ranking of China’s top 50 commercial banks based on owner’s equity, JNCCB was ranked no. 23 among the 126 Chinese stock banks that include 4 big state-owned commercial banks, and was ranked no. 8 among the 112 city commercial banks in the entire country.
The objectives of the cooperation between our Bank and CBA are: To learn from CBA the advanced business management concepts, to introduce new financial products and technical skills, to speed up compliance with international standards, and to comprehensively improve our Bank’s integrated competitiveness.
Basic principles of the cooperation: With equity rights subscription as precondition, with introduction of technical skills and products as main cooperative body, with compliance to state policy and regulations as guideline, and without damaging shareholder interests as its essential core, the Bank will focus on reality while taking a long term vision, and will strive to transform itself into a first class bank with standardized management and good profitability in the entire nation.
Main Content of the Cooperation
The cooperation between our Bank and CBA started on August 6, 2003. Since then, it has completed four stages that included initial contact signing, thorough investigation, business and legal negotiation, and inspection and approval. On September 8, 2004, a formal cooperation agreement was signed by both parties in Jinan City. On November 4, 2004, the cooperation received the formal approval from China Banking Regulatory Commission. The main content of this cooperation are as follow:
Equity Rights Subscription and Participatory Management
Before the formal signing of the agreement, our Bank’s total capital stock was RMB1 billion. According to the agreement, CBA shall subscribe 11% of our Bank’s capital stock in their initial subscription, which will soon be realized. Before May 14, 2008, the total stock share of CBA may reach 20% of our Bank’s total shares. Our Bank plans to give CBA one seat in the board. Upon our request, CBA shall provide experts to participate in our Bank’s business management.
Technical Skills Transfer Projects
We will strictly observe the principles of taking long-term vision while focusing on reality, and giving importance to sustainability, feasibility, and cost and benefit measures. Our bank plans to introduce 7 technical skills from CBA, which mainly include IT, Credit cards, Credit Management, Risk Management, Sales and Marketing, Financial Management, and Fund Management, all of which cover the main aspects of business management of a commercial bank. By observing comprehensive demonstrations, the plan is to complete the introduction of the specific schemes of these 7 technical skills by the end of December, to organize the implementation this coming February to March, and to accomplish skills transfer in around one and half years. At the same time, we are formulating plans to send business cadres abroad for advanced training and some short-term training in order to prepare the human resources for our Bank’s long term development.
The retail business of CBA accounts for over 60% of its total business volume. It has abundant experience in mortgage business. Our Bank and CBA are plan to adopt a cooperative form to establish and develop the mortgage business. CBA shall be responsible for providing special technology in mortgage product design and product development skills, and for providing technical support on mortgage application, handling, and after sales service.
Function of the Cooperation
The main function of the cooperation between our Bank and CBA are as follows:
- To increase capital and improve our Bank’s risk prevention capability. CBA’s initial stock investment shall be 11%. Once this investment is actualized, our Bank’s equity ratio shall increase by over 1% point, resulting in our Bank’s equity ratio of 10.26%, thereby, further improving its risk prevention capability.
- To speed up compliance with International standards. The cooperation between our Bank and CBA involves joint implementation of capital absorption and knowledge introduction, with the adoption of capital absorption as precondition and knowledge introduction as main focus. Through the introduction, absorption, and assimilation of CBA’s advanced concepts, experiences, skills and products, our Bank will achieve full compliance with international standards. Within 1 to 2 years, we will achieve the objectives of effective management, capital sufficiency, strict internal control, safe business operations, and excellent service, profitability and assets in order for the bank to build a new platform, create a new image, and establish a new commercial bank.
- It will comprehensively improve our Bank’s business management level. The exchanges and cooperation with CBA will promote changes on business management concepts, risk awareness and regulation compliance awareness for the entire bank. The comprehensive implementation of the Capability Transfer Program (CTP) shall enhance the entire bank’s unity and coherence, further improve the quality of its personnel, and provide excellent financial services to the society and customers. Our cooperation with CBA has received great support and attention from provincial and city leaders and relevant agencies. During the signing of the agreement, there were over several dozens of media organizations, both domestic and international, who made extensive coverage, hence, further increasing our Bank’s fame and image in society.