This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

China Bank Deal Could Open M&A Floodgates

NEW YORK ( TheStreet) -- A proposed deal by Industrial & Commercial Bank of China (ICBC) to buy Bank of East Asia's U.S. subsidiary could be the first of many cross border retail bank transactions between the U.S. and China, though some believe big hurdles remain.

The deal is worth just $140 million, but it would represent the first acquisition by a mainland Chinese bank of a U.S. bank since 1991, when Congress passed legislation that places tougher restrictions on regulation of foreign banks operating in the U.S., according to a memo from Wachtell, Lipton, Rosen & Katz.

Chinese banks have long sought to acquire a U.S. bank, but U.S. regulators have stood in the way because to approve foreign institutions as buyers of U.S. banks the Federal Reserve must give official indication it has confidence in the home country regulator of the acquirer. Thus, once one deal has been approved, others should be "much less of an issue in subsequent acquisitions by the same bank or by other banks from that country," according to the Wachtell memo.

Wachtell believes the approval could take some time, but "given the larger political context and the events surrounding the announcement of the deal, it seems likely that the parties have vetted this transaction from all relevant angles," according to the memo. The "larger political context" refers to the fact that Chinese President Hu Jintao was visiting the U.S. at the time and, as The Wall Street Journal put it in its Jan. 22 story breaking the news of the deal, both Beijing and Washington are calling for greater commercial ties between the two countries.

Ken Thomas, an economist and independent consultant who has worked with Chinese banks looking to make U.S. acquisitions, expects institutions that cater to a Chinese-American clientele will be next on the list.

East West Bancorp (EWBC - Get Report) and Cathay General Bancorp (CATY - Get Report) are the largest U.S.-listed banks serving a mostly Chinese-American clientele, though there are others, including Preferred Bank (PFBC - Get Report) in Los Angeles and MetroCorp Bancshares (MCBI).

Executives from these banks did not return calls.

Even if Chinese banks were to buy up all of these companies, however, it would just be a drop in the bucket in terms of Chinese ambitions in U.S. financial services.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CATY $27.32 1.22%
EWBC $29.15 -1.95%
MCBI $15.06 -0.07%
PFBC $29.81 1.19%
AAPL $94.99 -0.02%


Chart of I:DJI
DOW 16,014.38 -12.67 -0.08%
S&P 500 1,852.21 -1.23 -0.07%
NASDAQ 4,268.7630 -14.99 -0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs