Study On Motives And Efficiency Of China's Banking Cross-border Mergers And Acquisition

Since the middle of 1990s, the International Banking Industry launched a third M & A wave. In this M & A, Cross-border M & A is particularly conspicuous. Banks in China have also joined to the cross-border M & A wave actively, Industrial and Commercial Bank of China merged the British Westminster Securities Asia Ltd. in 1998,it is the first cross-border M & A case of China's Banking. Since 2006,Banks in China performed very actively in the cross-border M & A. Total amount of transactions and per-transaction scale of China's Banking cross-border M & A enhanced greatly than ever before and it represented some own distinctive characteristics.The paper carries on the carding and analysis of China's Banking cross-border M & A cases since 1998 systematically and makes a further study on the characteristics, developmental trend, motives and efficiency of China's Banking M & A. This paper studies the current situation of China's Banking cross-border M & A, we find that they have some own distinctive characteristics. The main characteristics include:from the subject of cross-border M & A, large state-owned banks occupy a dominant position; scale is relatively small; the M & A targets are chiefly distributes in Southeast Asia; Conglomerate Mergers account for a high ratio, M & A patterns mainly paid in cash. Bases on the analysis on the current situation and characteristics of cross-border M & A of banks in China, we find the trend of China's Banking cross-border M & A. The main trends include:cross-border M & A becomes more and more frequent; M & A volumes will gradually expanded; strategic alliance will become the main way of China's Banking cross-border M & A; cross-border M&A targets will involve the entire earth; more Small-Medium and joint-stock commercial bank in China will join to the cross-border M & A wave.On the study of motives of China's Banking cross-border M & A, this paper analyses them from internal and external levels. Internal motives includes: enhance their degree of internationalization; mixed operation in order to diversify their business; pursuing scale effect, obtain market share and huge profit; obtain advanced management experience and undervalued assets; disperse business risk; raise the capital adequacy rate of banks. External motives includes:adapt to economic globalization and global strategy of multinational corporations; break through the policy barriers of financial trade services; U.S. dollar assets management under the pressure of RMB appreciation; promotion of modern information technology; the domestic and international new situation bring new opportunities to China's Banking cross-border M & A.On the study of efficiency of China's Banking cross-border M & A, this paper use Financial Ratio Analysis and factors Analysis analyses two representative China's Banking cross-border M & A cases. The two cases are that Industrial and Commercial Bank of China (ICBC) merged Standard Bank of South Africa (SBSA) and construction bank of China (CBC) merged Bank of America Asia Limited. When using Financial Ratio Analysis, this paper analyzes the impact on bank's earning capability, repayment capability, operational capability, develop capability which brought from cross-border M & A.. When using Factors Analysis, this paper used ten indexes. The ten indexes are that Return on Equity (ROE), Return on Assets (ROA), Profit Margin (PM), Equity Multiplier (EM), DEBTR, Loan to Deposit Ratio, Asset Turns, ROE growth rate, Total asset growth rate, Operating incoming growth rate. This paper used spass16.0 software to extract three common factors and the information obtained contribution of each factor, ultimately obtained the common factor scores respectively and overall scores., and ranked according factor composite scores. Through analyzing the efficiency of banks after M&A using Financial Ratio Analysis and Factor Analysis, this paper found that the operational efficiency of ICBC and CBC fell in the early of post-merger, but the operational efficiency recovered after a time of post-merger and the operational efficiency take on the trend of rising.Through the study of China's Banking cross-border M & A, this paper find that there are still many problems in China's Banking cross-border M&A. The main problems include:lack of legal regulations and institutions to protect; M & A targets are concentrated in some region; the ability of risk judgments and assessment before M & A are weak; integration after M & A is very difficult; lack of experts. These problems restrict the further development of China's Banking cross-border M & ATo solve these problems, this paper made measures and suggestions on two levels that are external environment and bank themselves. In building a favorable external environment, we should start from the following:establish and improve laws and regulations related to M & A of banks; establish an effective mechanism for oversight and management of the banking sector; strengthen building intermediaries related to cross-border M & A of banks; establish a comprehensive, dynamic risk assessment system. The banks themselves need to start from the following:Shape the core competencies of banks; select the region of cross-border M & A of banks through successive stages; attach importance to the integration after M & A. In shaping the core competencies of banks, we should do the following:build the outstanding enterprise culture; improve the ability of financial innovation and shaping the mechanism of financial innovation; establish an effective internal management system. In choosing the region of cross-border, we should do the following: pay key attention to Southeast Asian market; accelerate the pace to access to the market of Europe and the United States; start to enter the market of Africa and Central & South America. In the integration after M & A, we should do the following:take an active integrated strategy; make precise plans of integration and carry out these plans rigorously; establish a professional integrating team; Shape an integrating management culture which oriented by quick and successful integration; establish mechanisms of guaranteeing resources integration and full intelligence support. We wish that it can to some extent improve some problems existing in China's Banking cross-border M & A by these above mentioned measures.