Category Banking & Finance

Citigroup hires Deutsche Bank China veteran

HONG KONG, March 26 (Reuters) – Citigroup Inc. (C.N: Quote, Profile, Research), the world’s top bank by market value, on Monday named Eugene Qian as a managing director in its China investment banking team, hiring him from rival Deutsche Bank (DBKGn.DE: Quote, Profile, Research).

Qian, who will report to Jing Zhao, Citigroup’s head of China investment banking, had been at Deutsche for four years, where he ran the bank’s Asian natural resources investment banking team.

Several senior bankers have switched jobs in Asia recently, as dealmakers traditionally switch firms after getting their bonuses early in the year.

Hiring a CFO in China

ChinaForum

With the right credentials, the opportunities for chief financial officer candidates are wide open in China. But those credentials are very different than expectations in the United States or Western Europe. Success is linked to the ability to set up processes and systems, as well as the ability to thrive in the local environment.

Demand, supply

When foreign companies move their manufacturing operations to China from nearby Asian countries, moving regional headquarters follows. Then the banks come along. This migration has created a huge demand for qualified financial professionals and a special demand for a unique type of CFO.

Thomas Zhou, an executive recruiter with DaCare Executive Search in Shanghai, told ChinaForum, “On the corporate side, the hiring activities are quite busy because all companies need a CFO or controller. Financial management helps them grow the business. We do quite a lot at the controller and CFO positions.”

Other recruiters see the same. In a recent article “Hiring Days are Here Again,” consulting firm Wang & Li says, “The greatest need area that we are getting is for candidates with strong financial management backgrounds who are able to take on CFO and Controller positions…. In addition to being familiar with both international and China GAAP, such a person must also have very strong experience in setting up financial systems and processes.”

To underscore the importance of systems knowledge and process, a study last year by PriceWaterhouse Coopers and CFO Magazine said that one reason CFOs in China find financial reporting a struggle is incompatible IT systems and poorly trained staff. Ting Liu of PWC’s advisory group in Beijing was quoted as saying, “The key reason that the finance function in China is not up to world class standards is mainly due to a shortage of qualified professionals as well as the advanced techniques coupled with state of the art IT systems.”

At smaller companies, Wang & Li, which specializes in placing international caliber bilingual professionals, points to a disconnect between the international environment expected by many CFO candidates and the localized environment of the businesses that need them. “Typically, the direction and intent of both the board and executive management team is there, but the day-to-day operating realities are quite a different story. Therefore, it requires a person who really understands how to get results and bring about fundamental change in a highly local Chinese company environment.”

Some companies take the route of not hiring a CFO at all. Lehman Brown, for example, provides outsourced CFO services for companies that have good finance teams in place but which lack the resources to hire a full time CFO, or which have only sporadic oversight requirements.

Credentials

Most CFO candidates Zhou sees have their CPA credential, which they typically earn in China. Although an MBA is not always necessary, many have earned graduate degrees and certifications overseas in the U.S. or U.K. Some candidates are trained by their companies or they are promoted to the Asia-Pacific level (Hong Kong, Singapore, Kuala Lumpur) and are trained there, he says. Other recruiters say companies like to see candidates with both an MBA and CPA, although finding such a candidate is rare in China’s tight job market.

Special skills

At a multinational company operating in China, bi-lingual fluency is not only an advantage but a necessity. “The person has to be able to speak English and Mandarin very well,” Zhou says, and be able to read and write both languages. “English is a must because he will have to report to headquarters in Europe or the U.S.”

Fluency in changing accounting regulations and market knowledge is also important. Not only must candidates be very familiar with the U.S. GAAP and China GAAP, but they should understand the China market and the U.S. market.

Soft skills are also important, Zhou told ChinaForum. “They should be able to manage a team. And personality is always very important. You have to be able to communicate very well.”

David Yeoung, a partner in the CFO and professional services practice of Hendricks & Struggles in Beijing, says that IPO experience is also helpful, given the number of overseas IPOs, although it’s not absolutely necessary as most investors know that IPOs are driven by teams. It is more important for the CFO candidate to have run the full financial function.

Ambition, a recruiting firm with offices throughout Southeast Asia, reports a trend toward “exact fit” hiring of CFOs, leading to a more rigorous selection process, which can take six months. With CFOs in China now highly visible after recent accounting scandals, and with responsibility far beyond accounting, the risks of hiring the wrong candidate must be avoided. One of those risks is simply not fitting into the corporate culture, which is why “internal candidates” are often perceived to be the right choice for regional CFO positions.

Meanwhile, Ambition is also observing in China new “governance roles,” which support the CFO in compliance and financial reporting matters. New roles are leading to job creation and increased opportunities for senior level financial professionals beyond the CFO title, often at high rates of compensation. Ambition describes this as a new governance support profession.

Hiring

Zhou’s search group is typically used by foreign companies doing business in China, generally the Fortune 2000, and including such companies as Intel, Microsoft and EBay. When a company seeks a high level executive or CFO, his firm is able to attract candidates by presenting the company well and offering an attractive package, which can mean more than straight compensation. In China, he notes, the job title is important. “More and more candidates like to see their career progress while they are working in the company.” Rather than the title China CFO, many would like to see the title CFO- Asia-Pacific, according to Zhou.

And whereas China has a reputation for being a low-cost labor pool, hiring at the CFO level is an area where scrimping doesn’t work. One mistake that corporate executives typically make is thinking that they will be able to hire financial talent cheaper in China.

In a June interview with the Dallas Morning News, Martin Tang, Spencer Stewart’s chairman for Asia, said that some companies think they can hire a CFO in China for as little as $40,000, but learn it may cost five times that, or more. Not only that, but wise companies over-hire to sandbag against employee dropout.

Tang described five talent pools from which executives are chosen: (1) Western expatriates, (2) Asian expatriates, (3) Chinese natives who return after earning graduate degrees abroad, and (4) Chinese locals who have remained in China. Of these, the most valuable are the Chinese who return from abroad, according to Tang. That’s because they have education, knowledge of both cultures and the advantage of being Chinese themselves.

When multinationals can’t find these returnees, Hendrick & Struggles’ Yeung says they should consider foreign CFOs who have worked in China “for a meaningful period of time” rather than hiring expatriates. Ambition reports that it is “extremely rare for a full expatriate package to be offered to a CFO hired locally.”

In Zhou’s experience, half the candidates are coming from the Mainland, half are expatriates. Local candidates “can have a good degree, be well trained in the Big 4, also have some industry experience and work long enough in the local markets for a multinational company. Even if they don’t have overseas background, they can get small or medium size CFO positions.”

In terms of pay, the CFO title in China doesn’t guarantee a large salary, except in certain industries that require specialist knowledge. Increasingly, CFOs are expected to demonstrate a record of success. Ambition reports that corporate governance concerns have led to a general scrutiny of CFO pay packages, with compensation trending toward performance based incentives.

Retention

Churn at the CFO level remains relatively low. According to Zhou, “Turnover rate at the CFO level is not that high. I won’t say that’s a problem in China. I would say that’s a stable position.” The Ambition recruiters concur, especially for non-Chinese speaking CFOs who may be reluctant to move on because they see the “dwindling demand for non-Chinese speakers.

Overseas banks sketch plan to hire thousands

By Zhang Fengming (Shanghai Daily)
Updated: 2007-02-05 14:27

With overseas lenders given a more level playing field to compete on the Chinese mainland, the competition has heated up to find experienced employees.
Star Ge, a headhunter for bankers, says the beginning of the year is the peak season for job seekers.

Big plans

Sales managers, public relations officers, translators and other positions are open for those interested in working for an overseas bank.

HSBC will add 1,000 employees this year after hiring the same number in 2006 as the bank expands investment in networks and personnel on the mainland, said Richard Yorke, chief executive officer of HSBC in China.

Hang Seng Bank also said it will hire about 2,000 people by 2010.

Some of the new employees are from domestic lenders.

“The competition among overseas and domestic lenders is not only about the fight for high-end clients but for talented staff as well,” said Shiu Kai-Wing at Capgemini, a consultancy firm.

The expansion ambition of overseas banks is easy to see in Shanghai.

Places like Xujiahui and the Jing’an Temple area stand out as key locations for overseas banks.

On the crossroad of Caoxi Road N. and Nandan Road, a batch of overseas banks including Standard Chartered, Hang Seng Bank, First Sino Bank and Bank of East Asia, fight for attention.

In January, Standard Chartered opened its biggest outlet in eastern China for priority banking, or high-end client investment services, near Xujiahui.

High on the list of skills required to work at an overseas bank is foreign languages, Ge said.

English helps

Chinese in their early 30s happily greeted Katherine Tsang, chief executive officer of Standard Chartered Bank China, and introduced themselves with their English names at the opening of the Xujiahui branch.

“People from domestic banks who have ample branch expansion experience are also highly desired by overseas lenders,” said Ge.

The demand for people with small- and medium-sized business experience also looks good on resumes.

“Most candidates see an opportunity to develop their careers as the main attraction of working at overseas banks,” said Ge.

It is expected that employees working for overseas banks will top 16,910 by 2008, according to PricewaterhouseCoopers.

Nonetheless, there are also some unwritten rules in the industry. Overseas banks are reluctant to grab too much talent from domestic partners to avoid potential conflicts.

HSBC, Citigroup and Standard Chartered have purchased strategic stakes in domestic lenders as part of a two-pronged approach to expansion on the Chinese mainland that complements organic growth plans. The last thing they want to do is cause problems with a domestic partner.

However, domestic banks are not defenseless in the battle to hire talented people. Some offer an allowance to purchase real estate. The amount varies on length of service and position, but it can be worth tens of thousands of yuan.

All about timing

Xiao Yang, a Bank of China employee in Shanghai, declined the chance to work at an overseas bank.

As a graduate from Shanghai International Studies University renowned for its foreign language education, he said the chance to speak English is rare in his current position.

“I want to gain more experience before making a wise move,” he said. “If the right timing comes, I will move.”

Premiums follow boom times

CHINA mainland’s insurance market expanded 14.4 percent to 564.1 billion yuan (US$73 billion) last year as the world’s fastest-growing major economy generated more demand.

Insurance companies’ total assets rose by 29 percent to 1.97 trillion yuan, according to documents issued at the China Insurance Regulatory Commission’s annual conference in Beijing yesterday.

The premiums on property and casualty cases jumped 22.6 percent to 150.9 billion yuan, while life premiums rose 10.7 percent to 359.3 billion yuan, the regulator’s chairman, Wu Dingfu, said at the conference.

China Life Insurance Co, Ping An Insurance (Group) Co and other insurers are benefiting from economic growth to sell more protection and investment products.

Government efforts to dismantle the cradle-to-grave welfare system are also spurring sales.

“The insurance industry’s growth is likely to be faster in coming years, as economic expansion will make the Chinese more willing to spend on insurance products,” said Tuo Guozhu, an insurance professor at the Capital University of Economics and Business.

Gross domestic product expanded 10.5 percent in 2006, down from a 10.7 percent pace over the first three quarters, National Development and Reform Commission head Ma Kai said on January 12. Still, the growth is the fastest among the world’s biggest economies.

The mainland’s insurance market may grow about 20 percent this year and in 2008, Tuo said.

Rapid premiums growth has made mainland insurers more attractive to investors. Shares of China Life more than quadrupled in the prior 12 months for the biggest gain among insurers worldwide, according to data compiled by Bloomberg News. Ping An more than tripled and PICC Property & Casualty Co doubled in the same period.

China Life’s yuan-denominated shares on January 9 more than doubled on their first day of trading on the Shanghai stock exchange, making the company the world’s second-biggest insurer by market value. The surge gives Beijing-based China Life a market value of US$128 billion, surpassing ING Groep NV, Allianz SE and Axa as the biggest insurer after American International Group Inc.

China Life raised 28.3 billion yuan selling 1.5 billion shares, or 5.3 percent of its enlarged capital, on the mainland last month.

Health and accident premiums rose 19 percent to 53.9 billion yuan, Wu said.

Insurance companies’ total returns on investment were 5.8 percent last year, 2.2 percentage points higher than 2005.

The changes in mainland’s health and pension systems to encourage consumers to spend more and save less have also helped to boost the insurance industry, Tuo said.

ICBC launches foray into Indonesian banking

THE Industrial and Commercial Bank of China has signed an agreement to acquire a 90 percent stake in Indonesian lender Bank Halim.

The remaining 10 percent will continue to be held by shareholders of Bank Halim, but ICBC has an option to buy the balance in three years, the Chinese bank said on its Website. The purchase price was not revealed.

The deal represents ICBC’s first takeover of a foreign bank, and it is also the first time for the bank to enter an overseas market via an acquisition.

The purchase is expected to produce valuable experience to help ICBC expand in the international financial markets, the Website statement said.

The two banks are now awaiting permission from their regulatory authorities before they can finalize the deal.

The agreement follows ICBC’s October 27 simultaneous listings on the Shanghai and Hong Kong stock exchanges, registering the world’s biggest initial public offering by raising US$21.9 billion. The ICBC share sale surpassed the US$18.4 billion raised by NTT DoCoMo Inc in 1998.

ICBC’s total assets exceed seven trillion yuan (US$897.4 billion), and it has 2.5 million corporate and 150 million individual clients.

The privately held Bank Halim is based in Surabaya, on Indonesia’s main island of Java. It had US$50 million in assets at the end of 2005, a capital adequacy rate of 57.88 percent and a non-performing loan rate of 1.32 percent.

Int’l banks move into RMB retail

Foreign banks are expanding aggressively in the lucrative Chinese market, knowing they will soon be able to deal in the renminbi retail business.
The country’s banking regulator approved over the weekend the first group of nine foreign lenders to incorporate locally, a sign that these overseas players will qualify for the business that is currently closed to them.

Executives of major domestic lenders in Shanghai said yesterday that Chinese players would be compelled to engage in further reforms amid the pressure that comes with full-front competition with overseas rivals in attracting high-end customers, recruiting talent and offering products with high added value.

At the same time, an equivalent competitive environment and supervisory framework would help domestic and overseas institutions carry out further partnership, they insisted.

The Hong Kong-based Hang Seng Bank plans to expand its operation on the mainland to more than 2,000 staff working among a network of 50 outlets by 2010, the bank said yesterday. The lender, a principal member of the HSBC Group with 15 outlets on the Chinese mainland, has been approved to begin preparations for setting up a subsidiary bank.

“Hang Seng’s mainland subsidiary bank, with its headquarters in Shanghai, is expected to be set up in the first half of 2007,” Johnson Fu, the bank’s head of China business, said.

He said that it would incorporate locally with a registered capital of 5 billion (US$625 million) and, as of 2007, the total investment by the lender would reach 6.7 billion (US$838 million), together with its 1.7 billion (US$213 million) investment in a 15.98 per cent stake in the Fujian-based Industrial Bank.

Compared with domestic rivals, the biggest obstacle for foreign banks is the scarcity of outlets. To close the gap, the British Standard Chartered Bank has decided to open two additional sub-branches before the end of 2006 and double the number of existing outlets within the next 18 months.

With one of the largest foreign bank networks in China with 20 outlets in 14 cities, Standard Chartered intended to expand the number of staff in China to more than 2,000 before 2008 from the current number of about 800.

It also signed a framework agreement last week with Shanghai’s metro operator and is about to install its ATM machines inside metro stations. Last month Standard Chartered announced the installation of their first ATM machine in Shanghai and their plan to set up at least 20 self-service facilities in key Chinese cities in the next few months.

In view of the fierce competition in the eastern regions, overseas players are advancing westward to explore the relatively less developed areas.

HSBC, Europe’s biggest lender, opened a new branch in Xi’an, capital of Northwest China’s Shaanxi Province, on Friday, becoming the first foreign bank to expand its presence to western China following the full opening of China’s financial sector on December 11.

“As an economic centre of western China, Xi’an has achieved impressive growth in recent years and offers great potential for HSBC,” Richard Yorke, HSBC chief executive officer China, said.

Vincent Cheng, HSBC chairman, said: “as long as there are customers, we will go there.”

Other players approved in the first group of nine to set up local corporations are also sparing no efforts to roll out new outlets. ABN AMRO and the Bank of East Asia plan to open 30 and 35 new outlets respectively in five years.

Overseas lenders are working to boost other parts of their operation such as product development, service improvement and image building.

Singapore’s DBS Bank posted an ad on Kong.net, a WAP portal owned by China wireless value-added service provider Kongzhong, to promote its brand.

Among imminent full-front competition, leaders of domestic lenders pointed to a wider prospect for co-operation in areas such as owner-management mechanisms, risk control, profit-making plans and product and service innovation.

Chen Xin, president of Bank of Shanghai, said yesterday that lenders would compete more fiercely for high-end customers in the relatively developed regions.

In order to best respond: “domestic banks should fully play on their advantages in geography, human resources and network, and enhance management, innovation ability and provide qualified services,” Chen said.

Economy expected to grow by 9.8% in 2007

China’s sizzling economy will slow slightly next year but still should grow by a robust 9.8 percent even as Beijing extends controls to cool off an investment boom, the Central Bank said in a report published Friday.

The forecast was in line with outside estimates but well above the 8 percent target for 2007 set by a government strategy report released this month. It would be by far the highest growth rate for any of the world’s major economies.

Growth this year should be 10.5 percent, said the Central Bank report, which was carried on the Web site of the official China Securities Journal newspaper. That was in line with earlier official forecasts.

Chinese leaders want rapid growth to reduce poverty. But they are trying to stop an investment boom in real estate and other industries where they worry that overspending on unneeded factories and other assets could ignite inflation or a debt crisis.

Beijing has raised interest rates twice this year, tightened controls on credit and imposed curbs on new construction.

Despite the controls, the government says investment in factories and other fixed assets in the first 11 months of this year soared by 26.6 percent over the same period last year.

In comments to state media, Ma Kai, chairman of China’s main planning agency, the National Development and Reform Commission, said this month that the “relentless expansion has yet to be stopped.”

Ma said in an interview Friday on the Web site of the People’s Daily that economic controls will be extended into next year to prevent runaway investment.

Inflation should be 1.4 percent this year and 2 percent in 2007, the Central Bank report said.
The government reported economic growth of 10.7 percent for the first nine months of the year. But official indicators show the expansion has slowed slightly since then.

The planning report, released this month following a meeting led by President Hu Jintao, said Beijing would focus next year on trying to shift the basis of China’s economic growth from investment and exports to domestic consumption.

Guangdong bank’s new man

MICHAEL G. Zink, the former head of Citibank Korea, has been named the new president of Guangdong Development Bank.

Guangdong’s former president quit after a Citigroup-led consortium won a US$3.1 billion bidding war on the lender.

Zink, a Citigroup veteran with 19 years’ experience in the United States firm, has had corporate banking and executive management roles in New York, Cote d’lvoire, Gabon, Tunisia, Russia, Australia, Indonesia, and South Korea.

Citigroup has six seats on the 16-seat board of the lender in China’s southern commercial hub. One is an independent executive.

The appointments were approved at a board meeting on Monday, Citigroup said yesterday.

Citigroup, the biggest US financial firm, and its partners, won out against Paris-based Societe Generale SA, and Ping An Insurance (Group) Co in the 18-month-long race for a combined 85.6 percent stake in Guangdong Development Bank.

The New York financial services company, China Life, State Grid and CITIC Trust and Investment Co each holds 20 percent, while IBM holds another 4.74 percent and Guangdong Finance Investment Holding, an investment arm of the Guangdong government, holds 0.85 percent.

The bidding money was injected into Guangdong bank, the country’s 11th-biggest lender, yesterday.

Citigroup says it will help improve the internal governance, risk management, introduce lending expertise, and upgrade technological infrastructure.

“There’s lots of restructuring to be done in the future to make the lender a globally competitive one,” said the China Banking Regulatory Commission.

Guangdong bank is a test case for banking reform as regulators allowed the bank to sell a majority stake to private investors to ease its debt burden.

Zhang Guanghua, the former president, quit last Monday. He was reported to have joined China Merchants Bank.

Bullish stock market hits historic high

BEIJING, Dec. 15 – For years, China’s stock market was an anomaly: the economy was going one way up and it was going in the opposite direction.

This year, it seems it can’t wait to catch up gaining a staggering 94 per cent and becoming one of the best performing markets in the world in 2006 mainly because of successful security reforms.

Yesterday, the market hit a historic high: the benchmark Shanghai Composite Index rose 1.15 per cent to close at 2249 points, passing the previous intra-day high of 2245 on June 14, 2001.

Turnover of Shanghai A shares was a heavy 36.88 billion yuan (4.67 billion U.S.dollars).

The Shenzhen Composite Index yesterday closed at 6044.28 points, up 71.80 points from the previous day. It has more than doubled since the beginning of this year.

“Factors like the steadily growing economy, a series of reforms in the capital market, and massive capital inflows into the mainland will see the stock market embracing a ‘golden decade’,” said a report in Shanghai-based Orient Securities. “The index is expected to break 3000 points in 2007,” it added.

In May last year, the central government embarked on an ambitious reform to convert non-tradable shares worth as much as US$250 billion to tradable ones.

“Now for the first time, the stock market is able to reflect China’s booming economy. It proves the ongoing securities reform has fundamentally changed the stock market from a gambling house to a normally functioning market based on true value”, said Li Yongsen, a professor at Renmin University of China.

With the bulls clearly on the ascendant, analysts point out that massive inflows of new money into the market make it hard to foresee when the rally will stop.

“With such excessive liquidity, the index is likely to continue to climb, and there is no clear sign it will end in the short term,” said Zhang Qi, an analyst with Haitong Securities.

The rise of A shares yuan-denominated mainland stocks has tempted many blue chips originally listed overseas to come back to the home market.

China Life Insurance, the nation’s biggest life insurer, has applied to issue A shares worth as much as 25.5 billion yuan (3.23 billion dollars) in Shanghai. The offer will likely make the company the second largest public offering in the A-share market after Industrial and Commercial Bank of China, the country’s biggest lender.

The bullish market has allowed many ordinary Chinese to share the profits from the economic boom for the first time.

“The rise is just crazy. Many of my friends have doubled their money by investing in stocks or mutual funds this year. I also want to put some money in the market,” said Li Yan who works for a law firm.

Bank regulator issues reform guidelines

Dec.7 – China’s banking regulator issued guidelines Wednesday to encourage financial innovation by commercial lenders, such as increasing earnings made from fees and giving out less risky loans.

The guidelines will take effect next Monday, the day China will fully open its banking sector to foreign lenders in line with its commitment to the World Trade Organization.

According to Tang Shuangning, vice-chairman of the China Banking Regulatory Commission (CBRC), China’s banking industry urgently needs to speed up its financial reform to deal with rising competition after fully opening.

“Chinese commercial banks lag far behind their international counterparts in terms of financial innovation,” Tang said.

He said non-interest income generally accounts for more than 50 per cent of the total income of big international banks. But the highest rate for Chinese commercial banks from fees is less than 30 per cent and most of banks earn less than 10 per cent.

He said the guidelines are the first such document concerning financial innovation issued by the banking regulator, signalling a new stage of reform.

According to the guidelines, the CBRC will set up a sound legal environment to encourage financial innovation. The regulator will further streamline approval procedures and strengthen supervision to facilitate financial innovation.

The guidelines also emphasize the importance of risk control. They require commercial banks have a good knowledge of their businesses, risks, clients and competitors.

In addition, the guidelines clarify commercial banks’ obligations to consumers, such as correct disclosure of information, professional services, protection of assets, and offering effective complaint channels.

Despite this need for reform, Tang said, commercial banks in China have made progress in financial innovation.

The CBRC’s statistics show the trading volume of major commercial banks reached 14 trillion yuan (US$1.77 trillion) last year.

Nearly 30 Chinese banks offer renminbi wealth management services, with a total value of 130 billion yuan (US$16.46 billion).

A total of 17 foreign and Chinese banks have been approved to invest clients’ assets overseas under the qualified domestic institutional investor (QDII) programme. So far, they have launched nine QDII products, with sales of 2.3 billion yuan (US$291 million) in renminbi and US$87 million in US dollars.

But more financial innovations need to be made, Tang said.

In addition to financial reform, commercial banks are being asked to engage in public education, informing investors that they should be responsible for their own purchasing decisions.

At yesterday’s press conference Tang also said the Bank of Communications and China Construction Bank have applied to establish insurance companies.