China's Pudong Bank to boost retail svc

By George Chen and Steven Bian

SHANGHAI (Reuters) - Shanghai Pudong Development Bank (600000.SS: Quote, Profile, Research, Stock Buzz) aims to boost its retail business by doubling its outlets in the next three years, to tap China's rapid growth in personal wealth, the bank's president said on Wednesday.

Pudong Bank, a local partner of Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz), hopes the proportion of its assets from the retail banking business will rise to 35 percent by 2010 from 15 percent now, Fu Jianhua, vice chairman and president of the Chinese bank, said at the Reuters China Century Summit.

The bank expects loan growth of 20 percent in 2007, compared with 21 percent in 2006, and deposit growth of 20 to 25 percent, versus 22 percent last year, Fu said.

"We are in the process of a strategic transformation as we have noticed the huge opportunity in the retail banking market, as Chinese people these days are becoming richer and richer," he said at the summit, held at the Reuters office in Shanghai.

"Chinese individuals will definitely see rising personal income from the country's fast economic growth, and they will definitely consider professional and diversified wealth management services as they get richer," he said.

The bank aims to double its nationwide network to nearly 800 outlets within the next three years, he said. Most of its current 387 outlets are concentrated in eastern Chinese cities around the financial hub of Shanghai.

The Shanghai-based bank is considering an overseas listing to raise capital for its rapid expansion, Fu said, although this would not happen this year as it would still need more time to prepare.

FOREIGN COMPETITION

Pudong Bank plans to sell 4.38 billion yuan ($580 million) worth of asset-backed securities in domestic interbank markets next week, but it had no investments in U.S. subprime mortgages, which triggered recent turmoil in the global credit markets, he said.

An investment arm of the Shanghai city government controls Pudong Bank with a stake of more than 20 percent, while Citigroup has said it planned to increase its stake in the bank to nearly 20 percent from about 4 percent.

Last week, Pudong Bank launched a fund management joint venture with French insurer AXA (AXAF.PA: Quote, Profile, Research, Stock Buzz), aiming to sell mutual fund products to Chinese customers before the end of this year.

Early this year, the bank signed a memorandum of understanding with BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz) on setting up an insurance joint venture, pending Chinese regulatory approvals.

Beijing is encouraging foreign firms to invest in its financial sector and has opened its doors wider to overseas banks and fund managers, allowing them to tap the country's retail markets as part of its commitment to the World Trade Organisation when it joined in 2001.

"We are not afraid of foreign competition. Instead, I believe we can jointly make the cake bigger through competition and cooperation," said Fu, who is also a former chairman of Bank of Shanghai, a smaller rival of Pudong Bank.

HSBC Holdings Plc (HSBA.L: Quote, Profile, Research, Stock Buzz) (0005.HK: Quote, Profile, Research, Stock Buzz) holds an 8 percent stake in Bank of Shanghai.  Continued...