indian banking and finance sector is very powerful, infact more than chinese. and investment in finance sector is also high.
I don't think that this claim is true.
China's ICBC is world's most-profitable bank
From left: Bank of China, ICBC, and Citibank towers in Hong Kong
China Construction Bank is world's second most-profitable bank
World's most-profitable banks for 2009
World's-largest bank market-capitalization
Chinese banks turning into modern global financial giants - The China Post
"
Chinese banks turning into modern global financial giants
Updated Tuesday, July 20, 2010 1:12 pm TWN, By Grace Ng, The Straits Times/Asia News Network
BEIJING -- Chinese folklore claims the world's first modern bank — complete with credit issuance and central bank regulation — originated in the early 11th century, amid flourishing cross-border trade during the Yuan dynasty.
Almost a millennium later, a rising dragon economy wants to show off to the world its modern banking giants, just as it did with other inventions from the printing press to gunpowder — which the Middle Kingdom claims credit for and which the West capitalized on.
And everyone is watching in awe.
China has the world's most profitable bank, four of the world's top 10 banks by market value, some of the world's largest bank loan books — and now, one of its newly listed banks may claim the title of the world's largest initial public offering.
With the debut of Agricultural Bank of China (AgBank), which raised US$19.2 billion, in Hong Kong and Shanghai last week, China's five state-owned listed behemoths are now squarely dominating the global banking domain.
By their sheer asset size, these lenders have ruled the roost for a few years.
The combined assets of Industrial and Commercial Bank of China (ICBC), China Construction Bank Corp (CCB), Bank of China (BOC), Bank of Communications and AgBank totaled 43 trillion yuan (US$6.3 trillion) as of the end of March.
This accounts for half of the domestic banking sector and is roughly the size of China's gross domestic product last year.
Their meteoric rise has confounded market watchers worldwide.
In just two decades, they have transformed themselves from debt-ridden basket cases financing wastrel state-owned enterprises, into some of the world's most profitable outfits.
ICBC, for instance, topped The Banker's annual rankings as the world's most profitable bank, with pre-tax earnings of US$24.5 billion last year, followed by CCB with US$20.3 billion.
It is an impressive show of earnings power, even if their internal controls and systems may still not be on a par with those of the West.
“The irony is that 10 years ago, China's banks were among the weakest in the world and today they are among the strongest, however primitive their system,” Pieter Bottelier, an economics professor at Johns Hopkins University and former World Bank official, told Newsweek last year.
Chinese banks have also become significantly more sophisticated in recent years.
While retail lending activities still make up the bulk of revenue — up to about 80 percent for the rural-focused banks — they are moving into areas like corporate and investment banking by recruiting aggressively and occasionally poaching whole teams from Western banks.
ICBC recently recruited banking star Zhang Hongli — former chairman of Deutsche Bank's China operations — as deputy president, to beef up its investment banking operations.
Meanwhile, BOC's investment bank is making a name for itself in Hong Kong. It was one of eight underwriters for Hong Kong-listed UC Rusal's US$2.55 billion flotation in January.
And five Chinese banks — both state-owned and state-linked ones — are in the top 10 core investment banking revenue earners in Asia excluding Japan, according to data tracker Dealogic.
The only area in which these state-owned banks have no foothold or state-boosted advantage is private banking.
“Which rich person in China is so stupid that he would let a state-owned bank manage his money?” asked one Hong Kong banker who declined to be named.
“But for investment and corporate banking, some of the bigger players like ICBC may well be keen rivals to Goldman Sachs and JP Morgan for Asian mandates in the next five to 10 years,” he added.
For foreign investors, Chinese bank stocks may look like a must-have part of their portfolios, to tap China's heady economic growth over the coming years.
Chinese Academy of Social Sciences research fellow Yi Xianrong said: “Chinese banks are profitable and they are a much safer bet than Western bank stocks
“At the very least, when you say the Chinese banks are too big to fail, you know it's true — the Chinese government will never let them fail.”
Yet even with China's top-three listed banks all posting record first-quarter earnings, and AgBank saying before its IPO that it expects a 40 percent jump in first-half net profits compared to last year, to 46 billion yuan, Chinese bank shares have had a rough year in the stock markets.
Some are hovering near 52-week lows, while their price-to-book ratios have fallen to less than two since April.
This is lower than other Hong Kong-traded bank shares such as Hang Seng Bank, which are trading at more than three times their book value.
It is because of this that some analysts have turned bullish on Chinese bank stocks. CCB's attractive valuation has won it “buy” or “overweight” ratings from the majority of analysts recently polled by Starmine, a company that tracks the performance and calls of equity analysts.
But others are worried about the risks of rising non-performing loans at Chinese banks.
“The banks lent heavily to the property sector and to fund local government projects in the stimulus measures last year. These areas may face problems this year, and the banks will face significant risks,” said finance professor Mei Jun of Renmin University.
As the big state-owned banks push on with their ambitions to expand operations abroad, especially in emerging markets from Africa to Latin America, there are also concerns about whether they are overstretched and overly exposed to global financial sector risks.
“Chinese banks are now shielded because they are focused on the domestic market, where the government can help protect their market share,” said Professor Li Jiming of Zhejiang University City College's business school.
Their risks will rise as they expand abroad, “but it is the price they must pay — and want to pay for world domination,” said Hong Kong-based analyst Charlie Chu."
