Wary Nab Jumps Aboard Its Slow Boat To China

The Age

Tuesday September 11, 2007

Danny John, Sydney

NATIONAL Australia Bank has gained its first cautious foothold in China, agreeing to take a 20 per cent stake in a trust company that operates in the growing property market.

The move is significant for NAB, which has up to now eschewed taking minority holdings in businesses in Asia's fastest-growing economy.

Neither has China been high on the bank's list of priorities for overseas investments, with chief executive John Stewart expressing a preference for expanding into Europe, South America and North America particularly through NAB's retail and agri-banking operations.

Mr Stewart has indicated reluctance towards buying into the Chinese banking sector, arguing that the 20 per cent limits on foreign investments would restrict NAB's ability to have a major say over the direction of the bank concerned.

This has set NAB in direct opposition to two major Australian rivals, ANZ and Commonwealth Bank, which have been active investors in the Chinese market.

Both groups have taken their maximum allowable shareholdings in two banks each, spending more than $650 million between them. ANZ has been the most aggressive and sees China as a major plank of its Asian expansion plans.

But Mr Stewart believes Chinese banks are overpriced, particularly in light of the fierce competition among foreign institutions to grab a slice of the action.

But having said he was "geographically agnostic" about where NAB might expand overseas in terms of making profits, Mr Stewart has nonetheless given permission for the bank's corporate finance and institutional banking arm, nabCapital, to enter the Chinese specialist property financing sector.

The deal to buy into Union Trust & Investment gives nabCapital an opportunity to expand the Chinese group's focus on starting up and then managing property trusts. The investment also gives NAB a seat on UTI's board, which will be filled by nabCapital chief executive John Hooper.

Mr Stewart said the move fitted NAB's plans to expand off the back of the business it had developed in Australia.

"Drawing on elements of its 'originate, warehouse and distribute model', nabCapital has the right blend of skills and capabilities to help develop UTI's business," he said.

NAB has not disclosed a price, but sources indicated that it paid $50 million, which values UTI at $250 million.

© 2007 The Age

Back to News Index | Back to Home