BoCom forms financial leasing unit to boost range of services

BANK of Communications yesterday set up a two-billion-yuan (US$273 million) leasing unit in Shanghai to expand services under its financial holding company.

The Bank of Communications Financial Leasing Co will offer leasing to industries including aviation, shipping, manufacturing and infrastructure.

"The financial leasing unit is a key step in BoCom's aim to build itself into a comprehensive financial holding company," the bank said yesterday. The Shanghai-based bank has also set up units in leasing, fund managing, trust, insurance and investment banking business besides its traditional lending business.

Meanwhile, China Construction Bank and Bank of America have formed a 4.5-billion-yuan leasing unit, CCB said yesterday in a stock exchange filing. CCB holds 75.1 percent of the venture while its American partner owns the remainder.

China lowered the capital requirement for domestic financial leasing firms from 500 million yuan to 100 million yuan in February, seeking to nurture them in an industry which is dominated by foreign investors.

Foreign companies dominate 60 percent of China's aircraft leasing market but the landscape will change in three to five years, Cheng Dongyue, head of the new BoCom leasing unit, said.

China opened its financial leasing industry to global competitors as part of its commitments when it joined the World Trade Organization in 2001.

Expansion into leasing will help make banks more competitive and enlarge their client base, the banking regulator said.

Industrial & Commercial Bank of China was the first domestic lender to open its wholly owned financial leasing company in November.

Five banks, including China Minsheng Banking Corp and China Merchants Bank, have won approval to enter the market.

The financial leasing industry has been around in China for two decades but is yet to take off. The country has 12 financial leasing firms at the end of 2006 with a combined net profit of 130 million yuan.