Already the largest banks in the U.S. have significant earnings based on corporate banking services tied to trade between the U.S. and China. Citigroup's Institutional Clients Group and Transaction Services unit earned $2.7 billion in revenue and turned a $917 million profit in the first quarter of 2012, an area of rare growth for America's third largest lender by assets. Citigroup also said that within the unit, which holds $13 trillion in assets under custody, Asia and the emerging markets as its biggest deposit holders. JPMorgan's similar Treasury & Securities Services unit reported revenue of $2 billion and a $351 million profit, reflecting 9% and 11% year-over-year growth, respectively. The unit increased assets under custody to $17.9 trillion as of 2012, a record. Fred Cannon a banking sector analyst at KBW sees gradual changes to the U.S. and Chinese banking sectors that will be "a big deal" in a matter of years or even decades. "We believe it is going to be an evolution and not a revolutionary process," says Cannon. The first step in that evolution is likely to take hold in cities tied to trade, notes Cannon. "You can see the Chinese initial push is going to be on commercial finance and trade finance, and a little trade retail," says Cannon, who sees major cities like New York, Houston, L.A., Seattle and San Francisco as being impacted. Cannon also notes the prospect of M&A in the $1 billion to $2 billion size as a possibility. Mid-sized U.S. lenders like Silicon Valley Bank ( SIVB) and East West Bancorp ( EWBC) may also use the changing relationship to expand their presence in China, Cannon adds. While the Fed's approval isn't likely to grab headlines in coming quarters, investors in the largest U.S. banks should expect both a new competitive dynamic in key urban markets and in revenue areas of the largest U.S. lenders. Longer-term, the approvals may lead to profound change. "China is approaching the U.S. in terms of the size of its GDP. It is the largest country without a banking presence in the U.S," notes Cannon, who adds that wholesale banking opportunities will open up for U.S. lenders as the Chinese economy and currency becomes less controlled. Comizio of Paul Hastings notes that after a 15-year effort by Chinese banks to improve operations, the Fed's decision signals that they're up to international standards. Previously, ICBC and China Minsheng Banking Corp. were blocked by the Fed in making acquisitions of U.S.-based branches because of what the Wall Street Journal reported were sub-standard controls. Still there are big near term question marks over the health of the Chinese banking sector and the ability for U.S. banks to expand in the market. Last week Bloomberg reported that Chinese banks may miss their 2012 lending targets amid an economic slowdown. Meanwhile, Citigroup's $1.15 billion Friday sale of a 8.6% stake in Akbank, Turkey's second biggest bank by market value, adds another example of a U.S. bank divesiture in an emerging market lender. Recently, Goldman Sachs ( GS) and Bank of America sold billion dollar-plus minority equity positions in Industrial & Commercial Bank of China and China Construction Bank, respectively. For more on bank M&A, see why the eurocrisis is the best M&A bet for U.S. superregionals and why U.S. subsidiaries may be in M&A crosshairs -- Written by Antoine Gara in New York.