CHINA’S second largest banking group — China Construction Bank — has applied for a banking licence here, several industry sources say.

“They have applied to Bank Negara (Malaysia) and are awaiting a decision,” says a local banker.

CCB and its public relations representative did not respond to questions from The Edge.

Industry talk has it that some local bankers have submitted their résumés to the foreign financial institution for key positions here.

CCB’s market capitalisation stood at US$173.3 billion as at end-2015, putting it among the top 10 listed banks in the world. Should it obtain the central bank’s approval, it will be the third Chinese banking group to establish a presence in Malaysia.

The other two are Industrial and Commercial Bank of China (ICBC) and Bank of China (BoC).

“There is space for a new player. The local banking industry is attractive to foreign banks … especially in financing the infrastructure part of things,” says a local banking analyst.

Another observes: “The appeal for a Chinese bank to operate in Malaysia is that the two countries have healthy cross-border trade.”

China is one of Malaysia’s largest trading partners while Malaysia is one of China’s largest trading partners in Southeast Asia. Their bilateral annual trading volume surpasses US$100 billion and in 2014, they pledged to increase this to US$160 billion by 2017.

According to the Malaysia External Trade Development Corporation, total Malaysian exports to China between January and May this year dropped 5% to RM34.64 billion from RM36.7 billion a year earlier. At RM34.64 billion, exports to China made up 11.3% of the country’s total between January and May compared with 12.1% in the same period last year. China was the second largest country after Singapore for Malaysian exports in the period.

Meanwhile, imports from China increased 8% to RM53.29 billion between January and May from RM49.13 billion in the same period last year. At RM53.29 billion, imports from the world’s second largest economy made up 19.7% of Malaysia’s total — the largest portion by country — between January and May compared with 18.2% in the same period last year.

BoC was the first to begin business in Malaysia, establishing its first branch in 1939. But it ceased operations in 1959. Then in February 2001, it recommenced operations in Malaysia as a full-fledged commercial bank. Today, BoC has eight branches nationwide with six bank branches in the peninsula, one in Sarawak and a Visa processing branch in Kuala Lumpur.

It has been reported that BoC has its eye on a stake in local banking group AMMB Holdings Bhd. Buying equity interest in a local bank would give it a much bigger presence as its operations may currently have limitations on the reach and scope of services that can be offered.

BoC’s Malaysian operation posted a net profit of RM102.6 million in FY2015, down from RM103.25 million a year earlier.

ICBC started off here in 2001 and today has six branches, of which four are in the peninsula and one each in Kuching and Labuan.

In FY2015 ended Dec 31, zICBC in Malaysia recorded a profit before tax of RM40.2 million, up 50.6% from a year earlier. The improved bottom line was due to better net interest and non-interest income.

Meanwhile, CCB recorded a net profit of RMB228,886 million in FY2015 ended Dec 31, up 0.28% from FY2014. The group notes that its profitability in FY2015 was mainly due to a moderate growth of interest-bearing assets, which increased by RMB20,354 million or 4.65% from FY2014, proactive expansion of customer base and enhanced product innovation, which resulted in net fee and commission income rising by RMB5,013 million or 4.62% from FY2014, and its continuing effort to strengthen cost management and optimise expense structure.

In FY2015, CCB’s return on average equity was 17.27% compared with 19.74% in FY2014. Its cost-to-income ratio stood at 27.02% compared with 28.92% in the same previous period. CCB’s common equity Tier 1 ratio was at 13.13%, up from 12.11% a year earlier while its Tier 1 ratio rose to 13.32% from 12.11% in the same period. Its non-performing loan ratio rose to 1.58% from 1.19%.

CCB has 14,917 branches and subbranches in China and operations in Hong Kong, Macau, Taiwan, Singapore, Frankfurt, Johannesburg, Tokyo, Seoul, New York, Sydney, Ho Chi Minh City, Luxembourg, Toronto, London, Zurich and Dubai. It also has subsidiaries in Hong Kong, London, Moscow, Dubai, Luxembourg, British Virgin Islands, New Zealand and San Paulo.

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