Bank of America Corporation
and China Construction Bank announced an agreement on a memorandum of
understanding to jointly enter into a new credit card collaboration aimed
at providing innovative card products for the rapidly growing Chinese
market.
The two companies are planning a rapid roll-out of the collaboration to
leverage Bank of America’s leading credit card expertise combined with
China Construction Bank’s (CCB) market strength. The roll-out would be
implemented in two stages:
In the first stage, CCB would create a stand-alone credit card unit,
merging its current card operations into this new unit. CCB would also form
an advisory committee to determine and develop the unit’s business
structure. Bank of America would serve on this committee and provide
advisory services on the unit’s development.
The second stage would involve converting the credit card unit into a
Chinese-foreign credit card joint venture, registered in China. Bank of
America would acquire 37 percent of the joint venture and would begin
launching co-branded credit cards. At the time of the second stage, both
companies would have board of director representation and be a part of the
company’s senior management team. The second stage would occur after new
joint venture regulations are enacted by the Chinese government and
subsequent regulatory approvals are obtained.
“For Bank of America, this is a strategic collaboration in one of the
fastest growing economies in the world,” said Kenneth D. Lewis, Bank of
America chairman and chief executive officer. “It allows us to deepen our
alliance with CCB while also positioning Bank of America to participate in
the market’s future growth once new regulations are enacted.
“Our goal is to help CCB better meet the increasing financial demands
of its customers while increasing revenues for both of our companies,” said
Lewis.
Credit card volumes in China increased more than 70 percent in 2006 and
rapid growth is anticipated for future years as credit cards become more
available and accepted by both consumers and retail outlets.
“CCB’s credit card business is continuing to show strong growth
momentum,” said Guo Shuqing, CCB chairman. “We are well positioned as a
leader in this initial stage of the country’s credit card market, creating
an excellent foundation for our future development in this sector. Bank of
America’s credit card business is at the top of its class worldwide, and
can provide solid support for CCB to accomplish its strategic goal of
developing its credit card business, and help enhance this core competence.”
Since launching in 2003, CCB’s credit card business has been developing
rapidly. As part of the company’s overall strategy to become a world-class
retail bank, CCB’s credit card business has seen a continuous increase in
market share, product competitiveness, customer satisfaction and risk
management.
The scale of the business has also risen rapidly, leading to
improvements in quality and efficiency. The number of new cards issued, the
retail sales volume and the overdraft balance in 2006 were nearly double
those of the preceding year.
With a 20 percent market share, CCB is the second largest credit card
issuer in China, issuing a total of 6.34 million credit cards, of which
3.22 million cards were issued in 2006. Total retail sales volume was
RMB40.467 billion and the average purchase amount was RMB14,600, the
highest among all Chinese competitors.
This is third customer program offered jointly by the two banks
following the successful launch of their free ATM withdrawal and remittance
services last year. In June 2005, Bank of America became a 9 percent
shareholder of CCB and began providing advice and assistance to CCB in such
areas as consumer banking, treasury services, governance and risk
management designed to enhance the Chinese bank’s performance.
Bank of America
Bank of America is one of the world’s largest financial institutions,
serving individual consumers, small and middle market businesses and large
corporations with a full range of banking, investing, asset management and
other financial and risk-management products and services. The company
provides unmatched convenience in the United States, serving more than 55
million consumer and small business relationships with more than 5,700
retail banking offices, through more than 17,000 ATMs and award-winning
online banking with more than 21 million active users. Bank of America is
the No. 1 overall Small Business Administration (SBA) lender in the United
States and the No. 1 SBA lender to minority-owned small businesses. The
company serves clients in 175 countries and has relationships with 98
percent of the U.S. Fortune 500 companies and 80 percent of the Global
Fortune 500. Bank of America Corporation stock (NYSE: BAC) is listed on the
New York Stock Exchange.
China Construction Bank
The history of the China Construction Bank Corporation (“the Bank”),
today one of the four largest commercial banks in China, dates back to 1954
when the People’s Construction Bank of China was founded. This entity was
renamed China Construction Bank in 1996. China Construction Bank
Corporation was formed in September 2004 when it separated from its
predecessor, China Construction Bank, and succeeded to its commercial
banking business and related assets and liabilities. Headquartered in
Beijing, CCB had a network of 13,629 branches and sub-branches in Mainland
China as of the end of 2006, and maintained overseas branches in Hong Kong,
Singapore, Frankfurt, Johannesburg, Tokyo and Seoul, representative offices
in London and New York. The Bank holds 100% interest of China Construction
Bank (Asia) Corporation Limited, 75.1% of Sino-German Bausparkasse, and a
65% interest in CCB Principal Asset Management Co. Ltd. It has a total of
297,506 staff.
In July 2006, the Bank was ranked first among all Mainland Chinese
banks and 11th among all banks worldwide on the “Top 100 Banks in China”
and “Top 1000 World Banks” listings compiled by The Banker magazine, based
on the tier- one capital of the banks worldwide. It became the first
H-share constituent of the Hang Seng Index on September 11, 2006. In
November 2006, the Bank was ranked fourth in the “2006 Asian Banks
Competitiveness Ranking” jointly announced by 21st Century Business Herald,
the Faculty of Business Administration of the Chinese University of Hong
Kong, and Guanghua School of Management of Peking University – making it
the most competitive bank in mainland China. The Bank also won the “Most
Responsible Enterprise Award 2006” in an event hosted by China News Weekly
and the Chinese Red Cross Foundation, and was recently named “Best Domestic
Bank in China 2006” by the Asset.
