Industrial and Commercial Bank of China, the world's largest bank by market value, is moving into Canada with plans to compete directly with domestic financial institutions in some of their key markets.
After purchasing a small network of six branches in Canada formerly owned by Bank of East Asia, ICBC plans to use those assets as a beachhead for its Canadian expansion.
The strategy, which has been in the works for some time, will be unveiled in Toronto Tuesday.
ICBC intends to target newcomers from China and businesses with interests in both China and Canada, two areas in which Canada's major banks have been eager to grow.
The move underscores the increasing international ambitions of China's major banks, several of which now rank among the world's largest financial institutions after enjoying a long period of rapid growth.
For ICBC, the Canadian push is part of a larger overseas expansion that began after its $21.9-billion initial public offering in 2006.
ICBC is expanding in several countries around the world, and said last month it also plans to open more branches in the Middle East, where it has outlets in Dubai, Doha and Abu Dhabi.
The bank is also contemplating branches in Kuwait and Saudi Arabia.
By acquiring small local banks in various countries, then adding new branches, ICBC wants to take advantage of China's growing investment appetite around the world.
Its footprint outside China is relatively small, compared to its asset base inside the country. Less than four per cent of ICBC's assets are found outside of China.
"We consider it the best time to launch the banking business in Canada," Mingqiang Bi, chief executive officer of the Canadian operations said in an e-mail interview.
"While countries across the globe were hit hard by the financial crisis, Canada withstood many of its shocks. We are inspired and impressed by Canada's sound and stable banking system and supervisory regime."
Canada's huge potential market for expanding retail and business banking operations was also a draw, with roughly 1.4 million Chinese in Canada. ICBC intends to focus on Toronto and Vancouver initially but will branch out to other cities, such as Calgary, in the next three to five years.
Cat:e528746c-3414-401a-b14b-50247e3bdf01Forum:d0fa4e14-88d2-41f9-8a19-896bdff9544b
"In the past few years, the number of new immigrants from Mainland China increased sharply, which is a huge retail banking potential market to be explored," he said.
ICBC will adopt the name Industrial and Commercial Bank of China (Canada), to avoid confusion with Insurance Corporation of British Columbia, the government-owned auto insurer.
With a market capitalization of $209-billion (U.S.), ICBC is the world's biggest bank by that measure. China Construction Bank is second at $183-billion, followed by HSBC Holdings Plc at $158-billion and JP Morgan Chase at $142-billion.
ICBC was third on that list in 2007, trailing Citigroup and Bank of America, which were the world's two biggest banks at that time.
ICBC's initial public offering in Shanghai and Hong Kong in 2006 still stands as the world's largest, though it may be eclipsed by the forthcoming IPO of Agricultural Bank of China Ltd., which is the last of China's big-four banks to go public.
"Leading Chinese enterprises have adopted the 'going out' strategy," Mr. Bi said. "Taking notice of huge demands for cross border financial services, we have been actively promoting the strategy of internationalization and comprehensive expansion, speeding up overseas development."
Of the six branches ICBC has acquired in Canada through its purchase of a 70-per-cent stake in The Bank of East Asia (Canada), four are in the Greater Toronto area, and two are in Vancouver. That deal closed at the end of January, and in the months since then the bank has sent experts to scope out the Canadian operations and work on the expansion blueprint. ICBC did not say how many branches it intends to open in Canada, though it will open a seventh branch in downtown Toronto where its Canadian headquarters will also be based.
It plans to offer a wide range of retail and corporate banking products, including mortgages, bank cards, deposits and commercial loans. ICBC also intends to get into mutual funds and wealth management services, areas where it will face stiff competition from Canadian banks.
In addition to physical branches, the bank has significant plans for Internet banking in Canada, through what it calls a "cement and mouse" strategy, focusing on cheap money transfers between China and Canada. ICBC has 230 million retail customers and eight million corporate customers around the world.
This article has been corrected from an earlier version.
Grant Robertson