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Loan book soars for Chinese bank's NZ unit

NZN 27/04/2016 Jonathan Underhill

ICBC (NZ), the local unit of the Chinese bank that is the world's biggest lender by assets, has lifted its loan book by 343 per cent, by tapping into the growing economic relationship between China and New Zealand to write more mortgages, commercial and syndicated loans.

In its second full year of operations, ICBC (NZ) lifted loans and advances to customers to $379.9 million in 2015 from $85.7m in calendar 2014.

ICBC (NZ) became a registered New Zealand bank in November 2013 and has since been joined by Bank of China (New Zealand) and China Construction Bank (New Zealand). Its parent has some $US3.6 trillion ($NZ5.22 trillion) of assets, operates in 40 countries with 4.6 million corporate customers and 411 million individual customers.

Chairman Don Brash said ICBC (NZ) is aiming to expand in the local market, partly by building its domestic funding base.

"We're close to the limit of expansion on our existing capital base," Brash told BusinessDesk.

The biggest growth came from the lender's residential mortgage book, which soared to $102m last year, from $11.2m a year earlier. That's still tiny, with even TSB Bank leaving it in the shade with more than $2.7 billion of residential lending last year. Corporate loans jumped to $164m from $50.7m and syndicated loans rose to $114m from $24m.

Brash said all funding options are on the table at the moment, although he declined to give details other than to say the bank "wants to build its domestic funding base."

It offers a full range of mortgage lending rates from floating through to five years fixed. Currently, its floating rate is 5.6 per cent, similar to those offered by the big four Australian-owned banks.

"The increasing economic relationship between New Zealand and China is an important part of that background," Brash said.

He said there was a common misperception that people could borrow overseas at "zero interest" and use the funds to buy property in Auckland, driving up prices. That idea was "nonsense" and also didn't acknowledge that using offshore funds involved added currency risk.

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