Friday, September 6, 2013

Bank of America exits China Bank Stake

       It was not until Bank of America exited an 8 year investment with China Construction Bank that analysts became absorbed in this, surprisingly continuing trend. This move by BOA was a surprise to many individuals for many reasons. One, the partnership had generated the U.S lender trading profits of almost $15 billion. Not to mention, BOA’s relationship with CCB had been essentially beneficial to the company during the recent financial crisis. Even more appalling about BOA’s exit is that with the slow economic growth being faced currently, western lenders are reluctant to sell their stakes in Asian regions owing to the risks likely to be faced such as increased bad loans.
            Nevertheless, BOA is not the only U.S bank to have pulled out from Asian regions. Goldman Sachs, which exited from ICBC sometime in May this year. Additionally, Citigroup sold out of HDFC, Indian lender. Citigroup was also seen to relieve of a nominal stake in SPDB, after the end of a credit card partnership. Contrarily, other U.S banks have remained steadfast in holding substantial stakes in Asian lenders. Some of these banks include Caixabank, Santander, BBVA, and BNP Paribas. Commenting on the American banks exit strategies, China analysts professed that Western banks had been unable to penetrate extensive Chinese economies contrary to their expectations.
On one hand, Chinese banks were not limited by the same rules that governed western banks in IPOs, which thus gave them an advantage. Furthermore, Chinese banks were skillful in attracting Chinese clients from under Western banks. These points, nevertheless confirm the acknowledged, Chinese industries play hardball in a softball pitch, and fascinatingly, it is just business. For some, leaving the game is the best way to play safe, for others, learning the hard way is the only way to survive: there is no wrong or right.

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